Building A Faster, Safer Network On The Blockchain

When it comes to business, it’s no secret the competition is fierce. But in an increasingly interconnected world, even competing companies need to collaborate.

Rival banks and financial institutions (FIs) need to work together to serve customers and transfer money between banks. Car dealers need parts from competing suppliers and manufacturers to keep repair shops and vehicles running without a hitch. And, just about every company — from banks to car dealerships and everything in between — is willing to work with a teammate to get paid.

Emerging technologies like blockchain and distributed ledger-based APIs could be at the center of making that collaboration easier. In fact, they could be the next great technological frontier, according to Brian Behlendorf, executive director of the Hyperledger Project, a collaborative effort of more than 160 companies focused on the development of blockchain solutions and open-source tools. In a recent interview with PYMNTS, Behlendorf explained why he believes technologies like blockchain and distributed ledger can make B2B payments run more smoothly for businesses of all kinds.

“These can obviously be used prominently in the financial services space,” he said. “But they also can be used in the healthcare industry and often in supply chain settings as well, so there [are] lots of interesting stories and use cases there.”

Time-saving Transfer Technology

For financial services firms, the benefits of using blockchain and distributed ledger technologies were fairly apparent, Behlendorf said.

“It’s pretty easy to look at transaction networks [and] reconciliation between participants and see that it’s something that can be simplified through the use of distributed ledger,” he said.

The technology is built to make processes between FIs faster, which can cut down on both the costs and time needed to process transactions. Behlendorf cited FinTech firms like SWIFT that use blockchain and distributed ledger APIs to improve money transfer speeds.

“When it comes to transferring bank payments from one bank to another, we’re able to turn a three-day settlement time into a five-minute settlement time,” he noted. “So, this is really making things faster for that and saving these companies time and money in the process.”

But it isn’t just about a need for speed. Other banks and FIs, including well-known commercial savings banks like Bank of America and HSBC, are using the technology to cut down on the risks associated with large transfers.

“There are a lot of use cases [in which] organizations in the financial sector need to be able to not only share data, but do so in a trustworthy way that’s fast and easy to do with multiple parties at once,” Behlendorf said. “We’re [also] seeing [a lot] of those types of applications.”

Through collaboration on processes like the collection of Know Your Customer (KYC) and anti-money laundering (AML) data and building practical use-case applications, participating companies save time and money by pooling research rather than conducting it on their own, he added. These FIs often team up to tackle risk management evaluations and other operations.

A Faster Car (Payment)

But banks and other financial services firms aren’t the only ones making use of blockchain and distributed ledger APIs to make instant payment processing easier.

Behlendorf pointed to the case of an automobile maker, a company that wanted to find an easier and more cost-effective way to process the $3 billion in payments it receives from suppliers, consumer lenders and various other businesses in the automobile ecosystem.

“Today, a lot of those payments are processed manually, by calling someone else or someone using a web form or an email,” he said. “But the potential to automate that using blockchain technology is very real.”

The technology also has merits for companies that aren’t handling so much money that they might be considered an FI in their own right, Behlendorf said. Whether it deals in financial services, retail or any other industry, every company must process payments.

“Even for companies that don’t think they are in the financial business, everyone has a treasury and has money coming in and out,” he said. “[You] may not be doing $3 billion a week, but if you’re a smaller business, you hope that some bigger parties [are] adopting this technology — which can be time-saving and risk-saving — [forcing] everyone else to [as well].”

The Start of a Beautiful Blockchain Future

Behlendorf noted part of the excitement surrounding the impact of blockchain and distributed ledger technology on B2B collaboration stems from exploring and imagining new use cases for it. But, while exciting, that novelty also means blockchain’s full potential is still not fully understood.

“There are still ideas that need exploring,” he said. “There are still details that need exploring. The question that people are going to be asking as all of this continues to develop is going to be, ‘How does this technology really mature?’”

Behlendorf noted that while there is still a ways to go, there are already effective use cases in place, both at financial services firm and consumer companies like car manufacturers. For his part, he expects great things, as the technology continues to age.

“One of the things people complain about, or people say, is, ‘What does this really change?’” Behlendorf said. “But it’s not unlike the development of the internet in the 1990s and early 2000s. It could change a lot.”

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About the Tracker

The PYMNTS.com B2B API Tracker, a FI.SPAN collaboration, serves as a monthly framework for the space, providing coverage of the most recent news and trends, along with a provider directory highlighting the key players contributing across the segments that comprise the B2B API ecosystem.