Ulster Bank, AIB and PTSB are reportedly testing a blockchain system for processing electronic funds transfers (EFTs) between banks, developed by RBS. Deloitte's blockchain team are assisting with the testing, which is happening over at (my personal favorite co-working space) Dogpatch Labs.
Up to now when fintech people talked about the "payments" sector, they meant the card processing networks operated by Visa and Mastercard, and the thousands of companies fighting for space (and fees) along that path from the card machine through Visa/Mastercard to the banks and back again. That's because these systems can process a transactions in a few seconds, and do process millions of consumer transactions per day. EFTs can take up to a few days and aren't practical for most consumer transactions.
That could all change very quickly if the banks are able to process EFTs at the speed of a card transaction - why go through the Visa/Mastercard middlemen (with their fees and volumes of rules and regulations) if you can cut them out? EFTs take a long time because banks can't trust each other - Bank A needs to check and double and triple check every transfer from Bank B before making funds available to customers' accounts. Blockchain creates the possibility of an instant, trustworthy record of every transfer, so Bank A might immediately accept transfers from Bank B without further checks.
Whispers of a payments sector move towards EFT are already in the air due to PSD2 and the anticipated opening of the interbank "pipes" to third parties. If blockchain also provides a solution to the banks' trust issues, the combination of PSD2 and blockchain could cause a seismic shift towards EFT for consumer transactions.
This is an exciting time for blockchain technology in Ireland, as the opening of the Deloitte blockchain lab this spring appears to have created momentum for practical research and application. If that momentum leads to instant processing of EFTs, the companies that get it right stand to benefit hugely,
Blockchain has the potential to disrupt multiple industries for the benefit of customers