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The week in fintech: Blockchain yet to prove itself

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The week in fintech: Blockchain yet to prove itself

This weekly recapfeatures updates on bank technology, payments, online lending and other news inthe financial technology space. Send tips, ideas and chatter to kate.garber@spglobal.com. For other recent fintechnews, click here.

Financial institutions have begun to devote more attentionto blockchain, but there isskepticism around practical applications for the technology.

It remains to be seen whether blockchain's decentralizedvalidation system has the potential to work in realms outside of digital cashexchange, according to an Oct. 7 presentation by Christopher Whalen, seniormanaging director and head of research at Kroll Bond Rating Agency. Untilexperts can find a way to use blockchain's validation function to enable"cheaper, better, faster" transactions, banks may be better off withthe current centralized clearing system, Whalen said in an interview.

Blockchain has been a marketing success, but lacks an"economic use case," according to Whalen.

"It's incumbent on the advocates to be able to simplyand concisely tell us how the cost benefit is better than what we have now fora given application," he added.

Despite the uncertainty, financial institutions are pursuingblockchain solutions, according to two recentstudies conducted by IBM. The survey showed that 15% of banks and 14% offinancial market institutions interviewed are planning to roll out"full-scale, commercial blockchain solutions" next year. IBM alsofound that 65% of banks plan to produce blockchain solutions within the nextthree years.  

In U.S. payments,two Federal Reserve task forces have begun reviewing 19 proposals for a faster payment system. Theresults of this review are expected to come out in two parts, with the firstreport to be published in January 2017.

The U.S.Payments Forum recently releaseda white paper on EMV transaction speed that offers guidance to issuers andmerchants.

In European payments,the U.K.'s Financial Conduct Authority has announced it will work with theUniversity of Cambridge to assess regulatory concerns around peer-to-peerlending and equity crowdfunding, the FinancialTimes reports.

Also in Europe, Mastercard Inc. launchedan online shopping app powered by biometric data. The technology, calledIdentity Check Mobile, allows cardholders to verify their identity withfingerprints and facial recognition. Already tested in the U.S., the Netherlands and Canada,the technology will be released in worldwide markets next year.  

From Sept. 29 to Oct. 6, the SNL U.S. Financial TechnologyIndex rose 0.13%.

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S&P Global MarketIntelligence released a fintech primer on four areas — digital lending,payments, blockchain and digital wealth management — that are of particularinterest due to their rapid pace of growth, technological disruption, andregulatory and other risks. Click here to read the primer.