While every major bank, from BNP Paribas to Goldman Sachs, is investing resources in blockchain technology to solve problems in back-office areas like clearing, securities insurance and over-the-counter derivatives processing, RBC is going a different way.
The bank is looking at the technology as a potential solution to its loyalty program, in which points earned on credit card purchases can take eight weeks to post, forcing customers to wait that long to spend them.
“We see loyalty as a great use case for blockchain to allow us to provide customers more real-time access to rewards points to provide an almost Starbucks-like experience,” said Eddy Ortiz, vp of solution acceleration and innovation.
It’s a markedly different route than its competitors: Blockchain technology is inherently a pretty behind-the-scenes phenomenon. And for most banks, even if they started using blockchains, their customers probably won’t really notice.
Using blockchain technology would lower the amount of time (to seconds) RBC takes to process and post payments and points data. If it can bring real-time exchange to the bank’s merchant partners and consumer clients, it could also start letting customers spend their points at the point of sale.
“It benefits us internally to be more efficient in some of our processes, but that efficiency can directly translate to something the consumer sees,” Ortiz said.
Because most financial institutions still haven’t fully grasped how blockchains can improve their businesses and are still trying to understand its inherent complexities (despite how fast and how far blockchain research for financial services has grown), it’s not surprising that only 19 percent of them say they’re investing in it this year. Plus, there are other innovations in the industry that might seem vague and perhaps a little hyped, but whose benefits are easier to realize. That’s the lens through which all banks are looking at blockchain, according to Steve Ehrlich, lead analyst for emerging technologies at Spitzberg Partners.
“It is hard to argue that consumer-facing blockchain-based applications like loyalty programs are going to move the needle for clients more effectively in the near term than a new biometric authentication technology or chatbot,” he said. “Innovation departments need to show they’re being responsible stewards with their funds because they are competing for the money with other departments within their firms year after year.”
But Ortiz is optimistic that by proving the use case and solving the real-time issue in its loyalty program, other companies could follow its lead. He did not specify when RBC will come out of test mode but said it would be powering its rewards with blockchain “soon.”
RBC is a member of the R3 CEV consortium and “actively working with at least five” smaller blockchain startups internally.
In October, RBC also invested in SecureKey’s $27 million funding round along with its Canadian peers Bank of Montreal, CIBC, Scotiabank, TD Bank and credit union network Desjardins. They are all working together to create a digital identity tool that would let consumers verify their personally identifiable information for services like new bank accounts, driver’s licenses or other utilities on a blockchain-based platform.
“Our learning has been about how we use the technology contractually with other technologies to still benefit from the blockchain use but also allow us to make client lives easier,” Ortiz said. “We have evolved significantly.”