There’s been a lot said, written and pontificated when it comes to collaboration in the financial services business: banks should collaborate with FinTechs, the Federal Reserve should collaborate with banks, and data aggregators should collaborate with everyone.
But collaboration is easier said than done in financial services.
On the flip side, those companies that take collaboration and innovation seriously can provide the impetus for enterprises across every industry segment to rethink how they do business.
It’s one of the things that makes J.P. Morgan’s approach to working within the financial services ecosystem so different. Christine Moy, global head of Liink by J.P. MorganSM, told Karen Webster that modernizing payments can help banks and their corporate clients refashion their models’ very economics. Along the way, the benefits of streamlining cross-border B2B transactions can help banks carve out new revenue streams — not just for J.P. Morgan, but for its competitors as well.
As Moy told Webster, whole ecosystems can be created, weaving together banks and firms across the globe as they share information securely in real time. And the system can use blockchain as the key technology underpinning it all.
As she told Webster: “If you don’t want to create a central honeypot of data that basically is ‘collapsing’ all of the largest banks’ data flows in the world, there’s an opportunity to leverage some of the new technologies like blockchain that enable [secure] point-to-point communication.”
Last year, J.P. Morgan debuted Onyx, a new business unit dedicated to building next-generation payment capabilities. And within that unit, Liink is billed as the world’s first production-grade, scalable peer-to-peer (P2P) blockchain network designed to satisfy a slew of discrete banking and enterprise needs.
“The way we’ve designed it, it’s highly configurable,” noted Moy.
There’s an opportunity for banks to preserve their existing corporate relationships and take Liink’s services in something akin to a wholesale model, and then repackage and resell to their corporate client, said Moy — without indicating that things are “linked” behind the scenes. It’s a network that has been growing use-case-by-use-case, starting with the basics of helping to ensure that accounts are open and operational.
But on a broader stage, J.P. Morgan is in the process of opening up the Liink network for third parties to build on. Along the way, they can benefit from creating an intricate web that connects banks across the globe. And in a nod to how J.P. Morgan’s thinking and approach has broadened over the past few years, Moy pointed to the fact that the network had originally been called the Interbank Information Network, before being rebranded as Liink.
“The origin story of Liink,” said Moy, is that as J.P. Morgan and other banks began examining blockchain, “there was a lot of discussion about payments and blockchain.”
But upon digging deeper — and with the goal in mind of enabling faster, cheaper payments — some cross-border transactions were being obstructed or challenged due to the information transfer itself. In those cases, said Moy, there may not be enough information traveling alongside those payments to get them from point A to point B without friction.
From there, Liink started with its first application, Resolve, which is focused on examining and remedying sanctions exceptions that happen in the cross-border space. Resolution under traditional means (manually obtaining names and addresses, for example) can take days to weeks. It may require a daisy chain of communications to piece data together in order for the payment to continue being processed.
As to the driving force behind Resolve, said Moy: “It would be great if we could connect banks together in a peer-to-peer way to get the information in a much faster way” — with the whittling down of operational tasks from weeks to minutes. In the wake of Resolve’s debut, more than 400 banks have signed up to Liink’s network, with approximately 100 of those banks live today, setting the stage for pursuing what Moy termed the “holy grail” for banks: validating account ownership and operational status before making international payments.
That application, called Confirm, debuted last year. One use case for Confirm is that it can help a bank’s corporate client check if they have information for a valid open account for a supplier before sending payment — determining, for example, whether the account they have may be closed or out of date. As banks confirm the data with one another, said Moy, they can also collect new fees from their corporate clients, effectively creating a new revenue stream before the payment is even part of the equation.
Moy said as more banks have joined the network, Liink is meant to be “an industry-wide peer-to-peer solution. There’s a commercial model that relates to data, but also focusses on the confidentiality and privacy of that data.”
Account-To-Account — And New Ecosystems
Drilling down into the technologies embedded in the Liink network, Moy noted that application programming interfaces (APIs) are designed with ease of use in mind. Banks can resell their expanded services to corporate clients so that corporates themselves don’t feel like they have to join the Liink network.
Onyx’s broad portfolio, which includes JPM Coin, is focused on developing payments rails, shared ledger technologies, and further exploring commercial applications for blockchain in financial services.
In a future state, creating new ecosystems could involve connecting devices themselves, where machine-to-machine transactions can connect cars together. Blockchain can turn the connected car into a single source of transactions — paying for (and in some cases, generating rewards points) for gas, coffee and servicing. Conceivably, each car could have its own digital wallet to pay for goods or services (even insurance payments), where funds flow from account to account.
“My favorite autonomous driving use case is that you have a vehicle in front of you,” said Moy. “You’re in a rush — and the vehicles can ‘talk’ to each other and then pay the vehicle in front to move.”
Beats a horn any day.
Looking ahead, Liink will seek to broaden the ability for third parties to build their applications and deploy them through the network to its participating banks. The goal is to help banks solve specific business problems for themselves and their corporate clients, rather than building full-stack solutions from end to end.
As Moy told Webster: “We’ve got to pair the speed, agility and assertiveness of a FinTech with the safety and security of a bank’s infrastructure.”