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The week in fintech: New York regional bank betting on blockchain payments

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The week in fintech: New York regional bank betting on blockchain payments

This recap features updates on bank technology, payments, online lending and other news in the U.S. financial technology space. Send tips, ideas and chatter to rachel.stone@spglobal.com. For other recent fintech news, click here.

New York's Department of Financial Services has approved the first blockchain-based payments system in the state — a platform offered by a $45.87 billion bank.

Signature Bank is launching Signet, a blockchain-based platform that will allow commercial clients to transfer funds in real time. Both parties of a transaction must be Signature Bank clients that hold a minimum balance of $250,000, but the deposits are insured by the Federal Deposit Insurance Corp.

As few blockchain projects with ambitions of overhauling the U.S. financial system get off the ground, more companies are aiming for product viability and profitability. Signature Bank's platform could be the first of many bank partnerships for trueDigital Holdings LLC, the fintech firm that powers Signet.

Signet, which goes live on Jan. 1, 2019, will initially focus on power, shipping, real estate, auto and digital assets, a Signature Bank spokesperson said in an email. To make payments, the clients transfer signets, an approved virtual currency. One signet is a digital representation of one dollar on deposit at Signature Bank.

Signature had indicated earlier that it was exploring digital transactions, but Wedbush analyst David Chiaverini said he was surprised a product was launching this quickly. The two companies only began collaborating in April, trueDigital Head of Business Development Nick Goodrich said in an interview.

Goodrich said trueDigital is "definitely interested" in bringing new banks onto a digital currency platform. In particular, having banks with different fiat currencies would increase the global usability of trueDigital's network, the executive said.

Transfer and remittance of fiat currencies is "still such a headache" in the traditional financial ecosystem, Goodrich said. Anyone that needs a real-time payments platform, particularly one with repetitive payments or one that crosses borders, would be likely to use a blockchain-based system, he said.

Signet is only currently available to Signature's commercial clients, but Goodrich said trueDigital's technology is scalable to more users, both corporate and retail. Although rolling out the technology beyond Signature's clients is "of interest," he said doing so is "not an immediate" goal.

Chiaverini expects more banks to have such digital offerings within the next five years.

"Blockchain technology will be a part of the future of banking," he said in an interview, though it remains to be seen whether today's dominant virtual currencies will be a part of that system, too. "A consortium of banks may develop a way to use blockchain technology by side-stepping the virtual currencies," he said.

Elsewhere in fintech, the Swiss Financial Market Supervisory Authority has introduced a license for fintech companies. The license allows institutions to accept public deposits of up to CHF 100 million, so long as they are not invested and no interest is paid on them. Approved institutions must conduct business activities in Switzerland.

Germany-based Wirecard AG and Malaysia-based Berjaya Corp. Berhad will expand their cross-border loyalty platform to Singapore this week. The mobile app allows customers to earn and pay with loyalty points, view local participating merchants' flash deals and pay or redeem points within the app. The companies also plan to launch in the Philippines in the second quarter of 2019.

In a new insurtech report, the Milken Institute's Center for Financial Markets called insurtech's disruption of the insurance industry "questionable."

"The vast majority of insurtech firms profiled in this report simply provide for greater efficiencies that support current incumbents," Associate Director Jackson Mueller said in an email about the report. "There is far more collaboration than outright competition in this space at the moment, and incumbents are increasingly becoming the driving force behind insurtech's growth and development."

In cryptocurrency news, prices have continued to fall as bitcoin hit another new low for the year below $3,400 during the week. Bitcoin sat at $3,429.77 as of 11:00 a.m. ET on Dec. 10. Ethereum stood at $88.85.

From Nov. 30 to Dec. 7, the SNL U.S. Financial Technology index fell 4.95%.

A recent report from S&P Global Market Intelligence explores how banks and insurers are embracing fintech innovation. The report looks at recent trends and provides outlooks for the insurtech, digital lending, digital investment management, digital banking, payments and distributed ledger technology sectors. Click here to read the report.