The giant of American banks J.P. Morgan has teamed up with Siemens, the German engineering technology company, to develop a Blockchain-based new remittance system for the latter. The conglomerate needs an infrastructure that is able to process an increasing amount of transactions, and the blockchain turned out to be the best solution.
The Financial Times reported that Siemens partnered with J.P. Morgan to improve the automation of its payment system, becoming the bank’s first anchor client of its blockchain unit Onyx. This will allow the German company to make money transactions in U.S. dollars within its own accounts, which they both described as a first-of-its-kind application. There are future plans to integrate the possibility for payments in euros by 2022.
This payment infrastructure was designed to automatize the transactions’ recording and verification. The possibilities of digital technologies go far beyond what traditional ones’ can achieve. Heiko Nix, head of cash management and payments at the German industrial firm, commented during an interview with the Financial Times:
If the business would stay the same as it is today, I would say we are fine regarding our treasury set-up. We can automate a bit and maybe we reduce costs and cash allocation … This is not the reason why we are doing this. The reason is that we are seeing a huge change due to the emerging digital business models, because we will no longer be able to forecast cash, for example.
Naveen Mallela, global head of coin systems at Onyx, further commented that the system allows for automatic transitions like direct debits and standing orders to improve beyond the current standards. “You want more flexible rules or flexible triggers, that is where the current infrastructure falls short,” Mallela said.
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The Big Banks Are Using Blockchain Tech
This announcement empathizes the current trend amongst banking giants and major institutions to adopt blockchain tech because of the great advancements and improvements it implies for day-to-day operations, payment rails, and the settlement process of cross-border payments.
J.P. Morgan alleges there are many clients looking forward to testing their blockchain-based system, but Siemens will be the first to try it out.
Citi, Wells Fargo, US Bancorp, PNC, Fifth Third Bank, and Signature Bank, are some of the banks that have admitted to having started integrating blockchain technology this year. For example, Wells Fargo and HSBC recently announced they are using Core-FX distributed ledger technology for cross-border settlement: transactions with the U.S. dollar, Canadian dollar, British pound sterling, and Euro.
This trend is expected to grow rapidly, as it represents a fast evolution of the payment infrastructure and companies will not want to be left behind.
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