For ABN Amro's director of transaction banking, the company's strategy on blockchain tech can be best described with a restaurant analogy.
If you were looking to enter the business, Karin Kersten argues, you might first invest in a restaurant. Next, you might try to get a feel for the workflow, washing dishes and observing existing staff. It's then, she said, that you might be ready to enter the kitchen.
It's that final last stage that Kersten contends is most indicative of the activity at the Dutch bank, which boasts more than 22,000 employees across business lines including retail, private and corporate banking. A member of the Linux Foundation-led Hyperledger project, and an investor in Digital Asset Holdings, ABN Amro has 30 employees actively working in the proverbial kitchen to investigate blockchain applications.
Kersten told CoinDesk:
"We are doing experiments and seeing if they work. We are learning by doing, and working on different levels. There's not just one team working on the blockchain."
That's not to say that ABN doesn't have a more clear strategy for how it intends to move forward and which versions of the technology it deems more relevant for its business. As with many other major global banks, ABN is focused on distributed ledger aspects of the technology, and isn't working with digital currencies such as bitcoin.
"If you look at our view regarding the blockchain, we want to clearly separate bitcoin from the blockchain. There's bitcoin as a method of payment, and blockchain as the technology behind it. The latter we find interesting to explore," she said.
Kersten indicated that ABN is investigating matters related to trade finance and transaction banking, and how blockchain smart contracts can be applied to problems in these areas.
In line with its focus on distributed ledgers, Kersten said that ABN is not as focused on payments applications of the tech, which she said the company views as being more problematic from a regulatory perspective today.
Letters of credit
That's not to say that ABN Amro isn't looking to better develop an understanding of how the tech could be applied broadly.
One area of study for the bank, Kersten said, is how the technology could play a role in the issuance of letters of credit, in which a bank guarantees that a buyer's payment will be received according to an agreed set of conditions.
However, to start, Kersten explained how the ABN team approached this challenge by first talking with clients to understand the issues with current versions of this product. In the end, Kersten said this method found the bank deviating from its standard strategy, in which IT requirements dictate what is built.
"Here the experiment is completely different. We had a hypothesis and tested it, then pivoted," she said.
Kersten said that ABN is now entering the second phase on this prototype and that it could advance this concept to the minimum viable product (MVP) stage, but that this process is taking time, a willingness to iterate and patience.
"We want to learn about the content of the blockchain and see if there are interesting MVPs for clients. In the end, we want to add value," she continued.
The proof-of-concept is currently being built on the Ethereum blockchain.
Product over tech
While Kersten said that ABN Amro is working with the technology, along with IT vendors such as IBM and Tata Consultancy Services, she said that the company wants to focus less on lower-level parts of the stack, such as blockchain consensus methods.
Rather, she would like to see ABN Amro work on other components of its tests, namely, the top- and mid-level applications that facilitate communication between an application and a blockchain.
"You have to make a basis choice per application if you want open-source or closed-source technology, but we want to make valuable applications which are relevant for our customer base," she said.
Still, Kersten acknowledged that ABN will likely need to deepen its understanding of parts of this process, such as when to select a public or private blockchain platform, and which design will best allow the necessary parties to access the ledger system.
But, Kersten said that projects like this don't necessarily lead her to conclude that the technology will be ready for consumers soon.
Kersten told CoinDesk:
"When will it be on the market? When will it have scale? We don't know. What we know is that it's a promising technology."
Correction: An earlier version of this article incorrectly reported that ABN Amro was a member of the R3CEV-led banking blockchain consortium.