As the calendar turns to February, major global financial institutions are becoming increasingly vocal about the blockchain tech trials taking place in their innovation labs.
In recent weeks, UBS has announced experiments with smart bond applications, NRI has discussed investigating distributed ledgers for securities use cases and even JPMorgan, long one of the more bearish among banks on bitcoin and digital currency concepts, revealed it is seeking to evaluate the technology's use for improving trading processes.
More unique among these major firms, however, has been Royal Bank of Canada (RBC), which hinted in November that it was experimenting with blockchain tech to improve its consumer rewards and loyalty offerings. For Canada’s largest bank, boasting C$10bn in 2015 earnings, the announcement seemed at first glance to be a rare consumer play among a broad industry move toward B2B applications.
However, in a new interview, Linda Mantia, RBC's EVP of digital, payments and cards, indicated that the bank is looking at different use cases for the technology, with tests focused on applications for capital markets, cross-border payments and smart contracts.
Mantia indicated that for RBC, as in the industry at large, there’s a feeling that blockchain tech will become a kind of financial Internet for which the full ramifications of the technology have yet to be unlocked.
Mantia told CoinDesk:
"We’re all trying to figure out what it means. If Steve Jobs had tried us to tell us everything the iPad could do, we wouldn’t have understood it."
Mantia also addressed the growing hype surrounding blockchain, justifying the dialogue on the basis that, if there’s a potential for the next Amazon, eBay or PayPal-type service to be created, banks face a risk by not trying to seek out potential applications.
"If you look at every major advancement enabled by technology, there’s always hype. Eighty percent of the money won’t make it, but the last 20% can be massive," she continued. "At the end of every hype there's something transformative."
The comments come as members of the financial community are increasingly warning about the positive market sentiment being created around the technology.
But as a market leader, Mantia said, RBC can’t shy away from the opportunities and risks involved, adding:
"No one wants to miss it. If you don’t hop on the hype bandwagon, you’ll be left behind."
While Mantia did not reveal much about RBC’s rewards proof-of-concept, first discussed in November, she did speak to the value of experimenting with blockchain technology for the bank’s loyalty program.
First and foremost, Mantia described blockchain as a technology that would help RBC better deliver on its existing loyalty value proposition for customers.
"We’ve always said, ‘Your points, your money’. So we don’t lock people into the rewards store. We also let in certain merchants like Best Buy, so clients can use our points to buy from them," she continued, adding:
"We were moving pretty aggressively to let our clients think of it as another form of cash."
She hinted that a decentralized ledger could help it more effectively enforce the rules around this payment option, while also providing RBC with a means to improve operability with its partners.
RBC's control over its loyalty program, she said, also affords the bank the ability to use the technology in its own ecosystem.
However, RBC is also working with 41 of its peers as part of the blockchain consortium led by R3CEV, though it is not alone among members in pursuing private POCs.
According to Mantia, RBC first began researching bitcoin internally as part of its payments division. Mantia specializes in digital banking, credit cards, loyalty and retail payments, and is part of the company’s innovation efforts.
She described the culture that RBC is trying to create as one where questions are embraced and evaluated with an emphasis on business need, even if that means heading into uncharted areas.
"We started looking at it when it was just bitcoin to see what was it that was so interesting," Mantia recalls. "It was clearly trying to solve global commerce."
To Mantia’s team, bitcoin had proved most impressive when considered against past payments innovations, thus increasing RBC’s interest. But, she said the bank was early in its understanding that the blockchain represented perhaps the biggest opportunity.
"We thought this idea of getting distributed computer centers around a problem is probably the future, but we didn’t understand enough where it was going and we have been thinking through where we could use it," she said.
Mantia also spoke to the idea that RBC is seeking to expand its line of payment products, while underscoring the benefits to the anonymity or semi-anonymity a form of "digital cash" could provide.
Still, Mantia was non-committal about coming to a conclusion on the open, bitcoin blockchain, to date the only commercial-scale version of the technology.
When asked if she sees a future for bitcoin as a digital currency, she said that she believes there’s value to the idea.
“When you shop online do you need digital cash? Do you need it for the unbanked?" she asked, concluding:
"There’s something to it, there’s something that needs to be solved, a currency for the global economy.”