HSBC Plans To Launch A Series Of Blockchain-Based Payments Tests

HSBC Will Test Live Blockchain-Based Transactions

HSBC Bank, one of the largest banking and financial services companies in the world, will soon conduct several tests that will determine the efficacy of blockchain technology in facilitating live financial transactions. Moreover, these tests are part of a series of pilot programs that the bank plans to launch within the next few weeks.

While commenting on these tests, Joshua Kroeker, DLT lead for Global Commercial Banking at HSBC, stated that the financial giant is “confident enough [about blockchain tech] to actually do a live transaction.” Notably, HSBC has been researching and experimenting with distributed ledger technology for two years now. In late 2016, the bank introduced a new prototype designed to replace the inefficient, paper-based letter of credit (LC) transactions system with a blockchain-based solution.

Intensive & Collaborative Research On Blockchain Technology

HSBC developed the proof of concept (PoC) prototype through a collaboration with other large organizations, which included Bank of America’s wealth management arm Merrill Lynch and Infocomm Development Authority of Singapore (now restructured to Info-communications media development authority). It seems that this particular PoC will now transition to the pilot stage, after being conceptualized in August 2016.

Reportedly, in the time following the introduction of a blockchain-enabled, PoC, HSBC worked on improving its security and overall efficiency. The bank feels that it has reached the point now to actually engage its clients in this initiative. Kroeker noted:

Going from that PoC in 2016, we’re at the tipping point of getting our customers involved in live transactions in the coming weeks and months. The technology has come a long way, we’re much more comfortable with its security and scalability.

Generally speaking, security and scalability issues have plagued many blockchain-controlled platforms. Research companies have found numerous security vulnerabilities in applications that use distributed ledger technology. Additionally, scalability problems have affected many of the larger blockchain networks.

HSBC’s Roadmap To Live Production Stage

If HSBC’s blockchain-enabled, live transaction solution can effectively scale and implement adequate security features, then it could give the bank a competitive edge over other large financial institutions. That’s because banking giants such as JPMorgan and Bank of America have recently acknowledged that they feel threatened by the nascent fintech technology.

According to Kroeker,

That’s the stage we’re at now, we want to get the customers involved to do those [pilots]. The next stage after that, in getting it live into production, is a further amount of work around the application but more work on the network.

Although Kroeker did not comment further regarding the details of HSBC’s planned pilot programs, he did mention that it would take a lot more time before the bank’s blockchain-powered solution will be available for commercial use.

Based on these developments, it appears that HSBC is striving to remain relevant, so that it can retain its existing client base and possibly attract more business. Clearly, all banks need to innovate so that they can keep up with the rapidly evolving digital economy.