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Why Banks Should Go Easy On The Blockchain


When somebody likes hot sauce, they really like hot sauce. It’s known as the condiment that peps up anything, from eggs to pizza to burritos. As the PG version of the Frank’s RedHot slogan goes, you can put that stuff on everything.

So, why are we talking about spicy cuisine? Well, according to Fluent Cofounder Casey Lawlor, the blockchain is the Sriracha of FinTech, and banks and innovators are going a bit overboard with it.

“People are putting it on everything,” Lawlor said in a recent interview with PYMNTS, adding that while hot sauce might be a win for your plate of nachos, that doesn’t mean you can douse some chocolate cake with Frank’s.

“You know, at blockchain’s core, it only solves certain problems. You wouldn’t put Sriracha on everything, but you find the right situation, the right set of ingredients,” he continued.

The biggest financial institutions in the world are scrambling to get involved in blockchain technology, with talk of adopting the tool for anything from smart contracts, to cross-border payments, to the transfer of diamonds and precious metals.

But that’s a far cry from where the technology began, Lawlor said.

“Every time you go into one of these meetings with a bank with new technology and you’re basically telling a qualitative difference to the way things are done, the initial reaction is going to be skepticism,” he explained of the way blockchain was first received. “You start from that point, and you build trust through showing expertise and educating.”

The banks are certainly getting schooled on the technology, with most of the world’s top FIs participating in some type of blockchain development scheme, if not investing on their own internal programs to explore the tool.

FinTech innovators were the first to forge a path that could bring blockchain into the real world, but it wasn’t until financial institutions began investing and taking interest in the sector that it began to be taken seriously.

It may not seem fair, but Lawlor said it was necessary.

“Any time we’re dealing with people’s money, there’s a need for the legitimacy of a financial institution that’s been around for potentially hundreds of years,” he noted. “They also have the regulatory and compliance structures already in place.”

Fluent uses blockchain technology to facilitate the movement of supply chain finance and data. But its solution, the cofounder said, needs traditional FIs.

“In a lot of ways, we think there’s no one better positioned to improve the financial operations of supply chains than banks,” he said.

Naturally, Fluent is a proponent of its own hot sauce. That is, it sees a legitimate use case for the blockchain in the space of supply chain finance and data exchange. The company recently got a boost from Citi, which released a report that found no immediate threat of the blockchain disrupting several areas like cross-border payments. Instead, the technology is more likely to take off in supply chain finance, where Fluent operates, the report claimed.

“There’s always been a fundamental disconnect between information and payments,” Lawlor said, adding that banks are perfectly positioned to legitimize a solution that tears down those silos by implementing blockchain technology in this particular area.

Blockchain’s impact on the market is far from fully matured, so the industry will have to wait to see if Citi and Fluent are correct in their bet that supply chain finance will be one of the first industries to see disruption from distributed ledgers.

But the backing of one of the world’s largest banks behind that concept is a step forward.

For the banks, Lawlor explained, it’s about picking and choosing which areas of finance to add the ingredient of the blockchain. For the innovators, on the other hand, it’s about presenting an actual, usable product.

“It’s really about finding the right industry,” he said, “and then creating an application that solves a real problem — and, finally, turning it on and hitting go.”


New PYMNTS Report: Preventing Financial Crimes Playbook – July 2020 

Call it the great tug-of-war. Fraudsters are teaming up to form elaborate rings that work in sync to launch account takeovers. Chris Tremont, EVP at Radius Bank, tells PYMNTS that financial institutions (FIs) can beat such highly organized fraudsters at their own game. In the July 2020 Preventing Financial Crimes Playbook, Tremont lays out how.

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