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The role of distributed consensus ledgers in the future of digital payments

How banks can realize the full opportunities of cryptocurrency technologies in payments

Overview

The global rise of Bitcoin has introduced the world to cryptocurrencies, distributed consensus ledgers (DCLs) and blockchains. DCL technology has the potential to enhance efficiency, trust, transparency, reach and innovation in the financial markets. And while there are many other use cases – including in securities and capital markets – payments is one of the areas where DCL may prove most valuable.

There are clear reasons why DCLs can make a difference in the digital payments space compared to existing technology. They enable democratic, distributed, evenly-balanced control to be exercised in situations where it’s currently not possible or easy, such as international payments. DCLs also go beyond the capabilities of existing technology by providing transparency where it has previously been difficult to achieve, such as in anti-money laundering (AML).

Defining Features of a Distributed Consensus Ledger

Key Findings

Even a conservative assessment confirms that DCLs can make a difference compared to existing payments technology, for several reasons:

  • They enable democratic, distributed, evenly-balanced control to be implemented and exercised in situations where it’s currently not possible or easy. These include cases where oversight by a central authority is not feasible.

  • CLs also go beyond the capabilities of existing technology by providing transparency where it has previously been impossible, or difficult to achieve. Examples include anti-money la​undering (AML).

  • They enable counterparties to transact or share information in a trusted way, where they do not know each other. This means banks can do business with each other securely and directly without an existing relationship.

  • All of these advantages over existing technologies mean DCLs can enable new business models that would not otherwise be possible or practicable, and highlight why DCLs will have a big impact on the payments industry.

Recommendations

To become a leader in the industry-wide drive to capitalize on DCL technologies, Accenture recommends five steps bank should take:


Organize – including appointing a single DCL lead for the whole enterprise, and creating a cross-business unit/IT team to avoid duplication and siloed innovation.
Evolve a strategy and architecture – focusing initially on developing capability and generating know-how, while formulating an approach for generating revenue using DCL.
Build or buy a DCL capability – including educating IT and business staff, building capability in an agile way and/or acquiring start-ups.
Experiment and develop experience – for example by mining cryptocurrency and developing proof-of-concepts, and initial products and services, focusing first on payments with fiat currencies before products and services using “naked” cryptocurrency.

Engage with customers, FinTech and regulators – including getting licensed under     cryptocurrency regulations in relevant jurisdictions, and engaging with customers to test ideas and proof-of-concepts, and understand their developing requirements.