A technology like blockchain, which turns transactions and thus markets into a secure database, has the potential to upend all sorts of financial arrangements.
In addition to the Western banks that now control those relationships, and the technology companies that now control business computing, cities and countries around the world are going after the action, using both carrots and sticks.
For banks, this is life and death. Blockchain can cut the cost of borrowing, reducing the number of people who look at data, while at the same time bringing in more competitors — LendingTree Inc (NASDAQ:TREE) on steroids. Bill Gates called banks “dinosaurs” a quarter century ago for precisely this reason.
But banks have cash, and banks have names. PricewaterhouseCoopers sees banks as fintech venture capitalists, using their brands to take startups to market.
Barclays PLC (ADR) (NYSE:BCS) in London has opened what it calls the “biggest fintech center in the world.” BNP Paribas SA (ADR) (OTCMKTS:BNPQY) is opening what it calls a fintech accelerator in Paris. State Street Corp (NYSE:STT) in Boston has joined the Fintech Sandbox, a nonprofit that aims to catch startups when they’re barely ideas, get them cooperating with one another, and give sponsors first crack at funding them. Burling Bank in Chicago is sponsoring Currency, which it calls a center of excellence.
A Global Starting Gun
Here is another point. Unlike the Internet, which first developed in the U.S., or the cloud, which required vast amounts of capital, blockchain is cheap and hitting the whole world at the same time.
The island of Mauritius now wants to become a blockchain hub. Elsewhere in international fintech, Trupay transfers money in India, while in Italy, Satispay just raised 14 million euros. Airwallex handles international payments from offices in Melbourne, Hong Kong and Shanghai.
Nordic Capital has combined its fintech startups into something called Bambora, now operating in 65 markets, which can handle card payments across international borders on behalf of small businesses. It means a small Danish business can source from India or sell to England without paying huge fees for moving that money around.
American advantages in scale may prove no match for the international desperation for development speed. Fintech investment in New York is already declining as VCs look for sure things and rue the losses in early peer to peer lenders like LendingClub Corp. (NYSE:LC).
Clouds on the Blockchain
One advantage America still has is the cloud.
Cloud players are looking to build the most complex blockchains, like Project Manifest from Microsoft Corporation (NASDAQ:MSFT), which is looking to automate global supply chains using blockchain, alongside Auburn University’s RFID lab.
International Business Machines Corp. (NYSE:IBM) counters with a Japanese trading platform built on blockchain, run by Japan’s Mizuho Bank. Sonnen, a German solar power company, will also use IBM Hyperledger to market renewable power.
Alphabet Inc (NASDAQ:GOOGL) and Apple Inc. (NASDAQ:AAPL) already have their own fintech operations, Google Wallet and Apple Pay, but Andreesen Horowitz predicts Amazon.com, Inc. (NASDAQ:AMZN) is going to rule the segment, being more willing to invest in marginal businesses and startups.
And Finally …
It needs to be noted that blockchain isn’t just for money. The concept of an encrypted ledger, in which identities can be validated and choices made, can even be applied to rock and roll.
The Rock & Roll Hall of Fame, for instance, got into trouble in 2016 when its voting system was apparently spammed on behalf of the 1970s band Chicago. They went to Votem, a mobile voting system based on blockchain, to assure the integrity of this year’s vote.
Winners included five English boys who knew each other in Birmingham and started a rock and roll band, the Electric Light Orchestra, or ELO. There were no complaints.
Dana Blankenhorn is a financial and technology journalist. He is the author of the political polemic Saving Trumpistan, Restoring Democracy, available now at the Amazon Kindle store. Write him at [email protected] or follow him on Twitter at @danablankenhorn. As of this writing he owned shares in AAPL, AMZN, MSFT, and GOOGL.