11 Months Ago

Thus, as to the benefits of using Blockchain, the jury would appear to be still out.

However, stock exchanges do face a real challenge as Ernst and Young reported the number of companies that are filing to be publicly listed continued to decline in the first two quarters of 2019. Therefore, securities requiring the services of a stock exchange reduces.

The promise of a wave of new tokenised securities or as some call them, digital shares look appealing. According to World Bank statistics, the total value of securities trades in 2018 was $68.2 trillion. The Bank of International Settlement reported that the total value of Over The Counter (OTC) derivatives in 2018 was $544 trillion.

If the derivatives market starts to digitise its assets, enabling them to be traded 24/7 on a digital exchange, the opportunity is enormous. So, with this prize insight, people will continue to see innovation and new technology, like Blockchain, being harnessed, which possibly explains why traditional stock exchanges are embracing Digital Assets. 


Germany’s Deutsche Bank is rumoured to have disbanded its team, in London UK, which was itself researching how Blockchain could help the bank and then, in time, offer its clients low cost and more efficient products and services.

However, it has not stopped Deutsche Bank from joining the JPMorgan project, which uses Blockchain technology - this being recently reported by the FT. Deutsche bank will join 320 banks and is by far the largest to sign up to the Interbank Information Network (IIN). The INN aims to cut the cost and reduce the time it takes to carry out cross-border payments, which is attractive for Deutsche bank as it processes more euro-denominated payments than any bank worldwide.

According to JP Morgan Payments Head, the IIN provides solutions that would previously have taken up to “16 days” to resolve just “hours”. Ole Matthiessen, at Deutsche’s cash management division, said “The IIN would allow his bank to offer better services to their clients, and would lower the cost of processing difficult payments. Our competitors are not just the other banks, it’s also new players in the market, we need to become efficient enough to provide seamless real-time and digital process”.

This is yet more evidence of how institutions are adopting Blockchain technology as they realise the efficiency and cost-saving that can be generated in a highly secure environment, despite the naysayers who always present when changes are prevalent.

One of the key factors that institutions and private clients constantly question is ‘trust’. For Blockchain technology and, indeed, Digital currencies, users are going to have to trust before they engage or, at least, trust those organisations which are involved. The basic concept of moving from a system where there was a third party that one could go to in the event of a problem to a decentralised system, one has to, in effect, trust the digital code. It is something that users and regulators will need to frankly ‘get their heads around’. This very topic was recently discussed at an American Chamber of Commerce meeting by the Singapore Minister for Communications and Information, like Singapore, according to The Strait Times, is becoming  “a Smart Nation and Asian digital capital”. Banks are grappling with the challenge of how to update their legacy systems by exploring how technologies like Blockchain can help, which is why the Fin Tech and Reg tech-sectors are so active. However, trust remains a vital part of any innovation, especially in a highly regulated sector such as financial services.



A Year Ago

In a recent survey from PwC, it claimed that, of the insurance companies interviewed, 100% of them intend to integrate Blockchain Technology in some shape or form by 2021, and 81% are already familiar with the technology.


One of the first cases of study looking at using Blockchain Technology in the insurance sector was by AXA, which launched fizzy, (automating insurance claims for delayed flights). Fizzy recorded clients’ flights and then monitored the flight they had taken. It was then ascertained if there had been any delay by using global air traffic databases to monitor flight statuses. Subsequently, should a policyholder experience a flight delay of two or more hours, a then Smart Contract automatically makes a compensation payment to the policyholder. This removes the need for paperwork, so avoiding ‘hassle’ for both the policyholder and AXA alike.

We have seen how Blockchain Technology in other industries is fostering ‘collaborative capitalism’ (where companies are usually competing against each other and working together using Blockchain Technology) and so it is interesting that this is also now evident in the insurance sector. As KPMG reported “an excellent collaborative blockchain use is the fraud detection and prevention. Criminal activity often exploits insurers’ ‘blind spots’, where fraudulent patterns can only be detected across a wide data set, often across multiple insurers. Legal and competitive challenges have hampered insurers’ attempts to share intelligence on fraudulent activity to date. However, the development of a blockchain network could provide a way for competitors to safely and securely share data, gain visibility into criminal patterns, and prevent future losses”.

To further support this, Allianz recently told Forbes “Allianz is further exploring Blockchain Technology to simplify and accelerate cross-border insurance payments for its corporate customers. A project team is in advanced stages of the development for a token-based electronic payment system to allow for frictionless, transparent and instantaneous money transfers for a range of different types (of) payments.”

Blockchain Technology has the potential to automate and share in a highly secure manner the currently paper-based manual process such as policyholder identity, verification, contract validity checking, claims payments, etc, those reducing the administrative burden for brokers and insurance companies alike. Another exciting possibility for Blockchain is, therefore, its potential to assist in the creation of an incorruptible, international and cross-industry database which could be used to flag up possible signs of insurance fraud. 
This database could also be used to check information such as claims history and police reports, alongside a range of other information required by brokers and insurers when dealing with contracts and claims. These contracts and claims could then be recorded on the Blockchain, ensuring that only valid claims are accepted. One of the key advantages that supporters of Blockchain Technology highlight are that it uses cryptographic security and because data is not just held in one place it makes it harder to hack and alter stored records.

Once again we are seeing signs of ‘collaborative capitalism’ in action as several companies in the insurance sector have joined the B3i initiative. PwC has found, “there are benefits to be gained by insurers by pooling data to facilitate reinsurance processes”.

It is likely we will see the insurance industry increasingly using Blockchain Technology and also continue to offer new types of cover for...