[2016-10-28] ET: Blockchain isn't exactly beneficial for banks

Blockchain isn't exactly beneficial for banks

http://cio.economictimes.indiatimes.com/news/corporate-news/blockchain-isnt-exactly-beneficial-for-banks/55107450

Banks tout the cost-saving potential of financial technology as if it's a good thing. It is, but not for them. Commonwealth Bank of Australia said on Oct. 24 that it had completed a commercial commodities transaction with US lender Wells Fargo and trading firm Brighann Cotton that used most of the latest fintech jargon: blockchain, smart contracts and the Internet of Things.

Blockchain, whereby a network of computers verify and update an immutable record of transactions through a system derived from virtual currency bitcoin, is well-suited to banks that trade physical commodities. The Brighann Cotton transaction involved one of the company's subsidiaries shipping cotton to another. On arrival, funds transferred from the selling subsidiary's bank to the buyer's. That process was automated using a so-called smart contract, computer code that acts as a substitute for a legal agreement, and which can be stored and updated on a blockchain. The shipment's status was tracked over the internet using embedded microchips, so the contract terms could in theory be renegotiated instantly if the goods were delayed.