B2B Payments

Where Banks Could Go Wrong With Blockchain


Blockchain is on the tip of everyone’s tongue these days, but that was hardly the case even less than a year ago. With FinTech innovators and disruptors, financial institutions and traditional banks and already established payments players exploring the potential of the technology, the market is likely to see some consolidation and a more defined direction in how the blockchain is applied to the global ecosystem.

The obvious path for this progression is for large banks to acquire small disruptors’ solutions. But Casey Lawlor, cofounder and director of marketing at Fluent, says FIs need to tread carefully now that they’ve gotten on board with blockchain.

“Over the last eight to 10 months, we’ve seen a complete 180, from no one wanting to be the first to jump into this technology to, now, no one wanting to be the last,” Lawlor recently told PYMNTS.

Fluent provides a suite of solutions to connect banks and businesses and, earlier this month, launched the Fluent Network. The platform uses distributed ledger technology to enable not just the flow of payments between these establishments but the flow of information.

It may have taken some time for banks to get comfortable with this idea and for good reason: Research published last week by PwC found that banks and FinTech companies are anticipating massive losses due to disruptive innovations like blockchain.

According to PwC, more than two-thirds of these businesses said pressure on profit margins is the biggest threat from this disruption; 59 percent cited a loss of market share.

Lawlor said he’s seen this concern firsthand.

“Recently, a bank we talked to said that, in their 10-year plan, they see transaction revenue going to zero,” he noted. That’s a big goose egg, but it doesn’t mean traditional financial institutions are in trouble.

PwC’s analysis found that banks are scrambling to get on top of this market change and be first in line to benefit from it.

“PwC estimates within the next three to five years, cumulative investment in FinTech globally could well exceed $150 billion, and financial institutions and tech companies are stepping over one another for a chance to get into the game,” said PwC EMEA FinTech Leader Steve Davies in a statement announcing his firm’s research.

Lawlor told PYMNTS that while transaction revenue is on the decline thanks to this market disruption, other areas are prime for money-generating growth.

“Traditionally, you think of disruptive technology as taking away from the establishment, and that obviously was a concern for banks for a long time,” he said. “Some banks already realize they’re not going to make money in the traditional way, but they see FX and supply chain finance as a huge potential to make a lot of money. It’s kind of a reimagining of some of the core things that banks are good at.”


The Right Direction

With FIs finally getting comfortable with the idea that the blockchain could overhaul their business plans, banks are investing massive amounts of money into not only startups in this space but to establish their own, in-house teams to develop blockchain-based banking solutions for corporations.

Lawlor warned that this may not be the healthiest direction for the ecosystem, however, explaining that his vision for a blockchain-based financial services market is unlikely to include banks’ own solutions adequately meeting businesses’ needs.

“When you’re talking about banks, they have a very limited network; not all businesses will want to, or even be allowed to, work with another bank if they have their own bank with which they have a 30-year relationship,” the executive said. “A lot of the bank-specific products getting built in-house kind of suffer from being centralized within that specific bank.”

While banks may be applauded for being proactive in this regard, Lawlor noted that this is far from the spirit of blockchain technology.

“The whole benefit of blockchain is that it’s a distributed network,” he said. “But if you only have one bank using it, you eliminate most of the benefits of that network.”

Instead, the market will be better off seeing banks adopting a single standard from a nonbank innovator.

Until that plays out, however, financial institutions are still racing into this disruptive world. Lawlor described it as “the classic fear of missing out” for the banks, which is good news for Fluent.

“We are honestly receiving as many inbound calls as we are doing outbound,” Lawlor stated, adding that the Fluent Network lets banks offer more sophisticated business supply chain and finance solutions that they previously did not have the resources to offer.

What’s more, banks can allow corporate clients to realize massive cost savings by providing solutions that all interconnect — bill pay systems integrate into eInvoicing solutions, for example.

Lawlor said this saves businesses from having to hire a whole accounting team to connect the dots between these business processes — saving companies potentially hundreds of thousands of dollars.

The blockchain allows mid-market, regional banks to provide this type of offering, previously only offered by the major players, the executive explained.

“What we’ve seen recently is that a lot of banks see that there is a way to leapfrog over some of the higher or more established players; they can punch above a weight class for the first time by adopting this technology,” Lawlor said.

It’s a value proposition that he said makes it worth it for financial institutions to go along with the paradigm shift in financial services — even if that means overhauling their own game plans. “Banks are going to focus less on the actual transaction process when they adopt new technologies like blockchain,” he added.



Banks, corporates and even regulators now recognize the imperative to modernize — not just digitize —the infrastructures and workflows that move money and data between businesses domestically and cross-border.

Together with Visa, PYMNTS invites you to a month-long series of livestreamed programs on these issues as they reshape B2B payments. Masters of modernization share insights and answer questions during a mix of intimate fireside chats and vibrant virtual roundtables.