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Bank Fees & Blockchain: A Match Made in Heaven?

  • By Tom Hunt
  • Published: 6/12/2017
Over the last several months, I’ve been hearing a lot about how blockchain is going to revolutionize treasury and finance. I was a bit skeptical at first, but after taking a look at some of the proofs of concept out there, I began to drink the Kool-Aid, too.

The thing is, whenever a new piece of technology hits the market, treasury professionals are going to be skeptical. It’s just in their nature. I know; I used to be one. And we have to be—if you’ve ever walked through the exhibit hall of a treasury conference like AFP 2017—you’ll be inundated with pitches from vendors and if you’re not careful, you could spend hours getting wowed by some technology that your treasury function doesn’t have the budget for.

In a way, blockchain is no different; there will be plenty of blockchain solutions hitting the market in the coming years that really don’t apply to you or your business. But there will also be many that will, because there has been an effort by fintech developers to create solutions that improve routine business processes. Some, like Microsoft’s solution to improve the letter-of-credit process, are already in play.

The bank fee dilemma

I don’t have to tell you that there are plenty of arduous processes that treasury professionals would absolutely love to streamline. One of those is bank fee analysis. As I wrote about just a few months ago, this process is a huge headache for practitioners.

After reviewing the blockchain solution that Microsoft and Bank of America Merrill Lynch developed for trade finance, I saw a parallel with banking. It’s decentralized, and you have a lot of different players and different relationships. So why can’t we explore the possibility of using a blockchain solution for account analysis?

There are over 2,500 AFP service codes in the U.S. alone. Why? Because there is no consistency in the ways banks charge for services. Corporate practitioners end up being the ones to do all the analysis, typically through manual processes. That’s a nightmare for the treasury department of a huge corporation.

Could a blockchain solution help?

AFP is putting together a small, exploratory meeting with banks, treasury practitioners and blockchain experts to take a look at bank fee analysis and see if there is any way to make this happen.

Now, I won’t lie to you—this isn’t at the top of banks’ priority lists. I ran this idea by AFP’s Treasury Advisory Group during our latest meeting, and some practitioners were very skeptical as to whether banks would even bother to do something like this.

But what we do know is that banks, across the board, are working on blockchain solutions. And I simply can’t believe that when BAML decided to start working on blockchain, the first thing that popped into their minds was, “Let’s improve the letter of credit process for trade finance.” What is more likely is that Microsoft pinpointed an area that could be vastly improved, and they partnered with BAML on it.

So maybe that’s all the banks need to improve the fee analysis process—a push in the right direction from practitioners. The good news is that you can be part of that process. The space in our exploratory blockchain meeting is limited, but if you’d like to be a part of it, please feel free to reach out to me.

Additionally, if you’d just like to learn more about blockchain, then don’t miss out on AFP 2017. Blockchain, and how it is applicable to treasury and finance, will be featured prominently in a number of sessions. We’ll also have Don Tapscott, author of “Blockchain Revolution” and one of the top blockchain experts in the world, speaking at the AFP MindShift Breakfast. Tapscott believes that it’s only a matter of time before blockchain transforms financial services, corporate structure, business strategy, and government. From what I’ve observed, those changes are coming faster than you think.

Click here to learn more about AFP 2017 this October 15-18 in San Diego.

Tom Hunt is director of treasury services for AFP.
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