Why Regulation is Pushing Bank of Ireland Toward Blockchain

FEATURE
Stan Higgins
Apr 21, 2016 at 21:27 UTC  |  Updated  Apr 22, 2016 at 02:37 UTC

While recent headlines have trumpeted the work of ever-expanding consortiums of global banking giants, somewhat lost in the conversation are the smaller, regional banks that are increasingly investing resources to conduct blockchain projects.

For example, Bank of Ireland, one of the country's so-called 'Big Four' banks, recently unveiled a trial focused on trade reporting in partnership with professional services firm Deloitte. Involving the bank's Global Markets division, the trial, which began in January, sought to establish a reporting mechanism, based on blockchain, for the entire trade lifecycle.

At the time, the Bank of Ireland indicated that the test was spurred in part by the regulatory requirements facing banking institutions today.

Stephen Moran, innovation manager for the Bank of Ireland, reinforced this point in a recent interview with CoinDesk.

He remarked:

"I think it helps some big problems in the bank, including our global markets division. What popped out was a particular use case here, was how incumbent banks move forward on the regulatory agenda. And this is really driving what's required in terms of innovation."

Moran went on to explain that in an environment in which banks face rising regulatory requirements – and the costs that come along with it – blockchain technology provides a possible avenue for addressing those concerns.

"Once you have an overarching layer that is an immutable, secure and timestamped repository of information, it allows you to achieve that regulatory requirement and transparency," he explained, adding:

"It also gives you the regularity of information to your front office, to your clients."

Steps toward transformation

According to Moran, Bank of Ireland's interest in the technology had a dual origin.

First, like a growing number of financials worldwide, the bank saw a sea change away from skepticism about the code underlying bitcoin and toward the idea that it could solve real problems in banking.

He told CoinDesk:

"The story of blockchain was...you know, like everyone else, you kind of see the fear of missing out. It's not that were were hugely skeptical about stepping in at the intake. It's more [about] context from different problems that surfaced in the organization that came back around to blockchain."

Moran drew a wider context, suggesting that the bank sees blockchain as part of a trend toward a more digitized banking system, not just in terms of what consumers experience, but also in the back-office side of things.

Further, he framed the bank's interest in blockchain applications alongside a desire to test and potentially deploy other financial technologies.

"Like a lot of banks, we have a legacy system, and we're going through the process of transformation but that takes time," he said.

That process, Moran went on to explain, mirrors actions at other banks around the world – a bottom-up evolution wherein different business divisions within a particular institution put forward ideas and resources toward possible applications.

He remarked:

"We made the argument, we made the case to embark on this voyage of discovery for blockchain. We said, whichever part of the organization you're in, put your hand up if you want to get involved. This was, I think, the key sense for us – we have people from our technology division, corporate treasury division, retail division."

Promising results

In interview, Moran discussed the bank's trade reporting trial, which he said was the result of a desire within the bank's innovation ranks to move past simply talking about possible uses cases.

Moran said that the test sparked further questions among the bank's innovation leads, including how to assess which platforms or networks to use. For example, Bank of Ireland used Deloitte's Rubix blockchain platform as part of the test.

Ultimately, this year's test will beget more, he said.

"We need to continue the journey," he explained. "We need to – we don't necessarily have to be a leader, but we need to make informed decisions for ourselves for what path we take before we end up in a position where decisions are made for us. Making decisions for ourselves is key."

Other use cases on the Bank of Ireland's radar include remittances and value transfer, something Moran was of particular interest given the bank's role in Ireland-to-UK money transfers.

He suggested this use case and others would be subject to further testing both internally as well as in partnership with Deloitte and other potential partners.

Looking ahead

During the interview, Moran suggested that Bank of Ireland sees a role for blockchain in the country's financial system, and said the bank wants to work with the domestic startup community on both exploring use cases as well as developing prototype products.

He pointed to recent events like an October blockchain hackathon hosted in Dublin as an opportunity to speak with and learn from startups working with the technology, a process that he said is still ongoing today.

"Now we have the chance to go and engage in a meaningful way with those startups," he said.

Like other financial institutions, Moran said the Bank of Ireland is taking its exploration of blockchain slowly but steadily. As for the recent test, Moran indicated that next steps include taking those results to the bank's leadership and figuring out which use cases to test and which bank departments should become involved next.

Moran concluded:

"The future is undefined, except to say we've got momentum and we'll see where we go. And that's our message to the organization and the country as a whole."

Image via Bank of Ireland

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