Your correspondent recently attended Temenos' annual conference in Lisbon, Portugal.

Private banks could streamline onboarding by creating “digital vaults” underpinned by blockchain technology that safely store clients' details and data, the chief strategy officer of a financial technology giant has suggested. 

Because of their association with privacy, private banks tend to be trusted more than their retail or business counterparts by consumers. And they should capitalise on this using enhanced technology systems to store sensitive information and differentiate themselves from competition, says Ben Robinson, Temenos CSO.

“As we trust private banks, there is real pressure on them to keep our information and assets safe,” said Robinson. “And I think there is a real opportunity for them to make data storage an enticing selling point.

“The problem today with private banks is that they are passing off undifferentiated products and services as differentiated, when in fact they no longer are. So where is the value add?”

Robinson went on to explain how wealth institutions could create private blockchains for clients to store their information, which could then be shared internally when required. This would be a selling point, as clients would only be required to provide their information once, and it would also relieve the administrative burden on banks while saving them time and money, Robinson said. He was speaking to this publication on the sidelines of Temenos' annual Community Forum in Lisbon, Portugal. 

“A private blockchain could act as a digital vault, which could store all of a client's information and data about their assets,” Robinson said. “Know-your-customer [KYC] checks, logically, should only have to be done once. The blockchain storing the information could then be shared with whoever and whatever requires authentication.”

Distributed ledger technology, or blockchain technology, is a virtual distributed ledger of transactions shared peer-to-peer that can record ownership across a public network of computers rendered tamper-proof by advanced cryptography. It is already known as the platform underpinning the controversial digital currency bitcoin. The technology is seen as having uses that go far beyond financial transactions to areas including transfer of legal agreements, for example.

The technology is causing a stir within the financial services sector as its supporters believe it could reduce hidden expenses in the financial system by ousting inefficiencies across areas such as payments, syndicated loans and equity clearing.

Because of its affiliation with bitcoin and the Dark Web, a common misconception surrounding blockchain is that it helps hide the tracks of money launderers. This is not the case, however, as it leaves an indelible audited trail of transactions. 

By the end of this year, financial institutions will have spent more than $1 billion on blockchain-related projects, according to boutique investment bank Magister Advisors. 

Robinson said that private banks need to revolutionise their business models to be more technology-focused.

“It all comes back to new business models for private banks,” he said. “Trying to go down the route of simply replicating products and services in a digital format on an online platform will not cut it anymore.”

He continued: “It would be more advantageous to explore innovative business models, and implement cutting-edge systems like this one.”

Regulators and banks across the world are piling onto the blockchain bandwagon in strong numbers. Singapore's central bank and regulator earlier this year said it was ready to begin testing cross-border payments underpinned by blockchain. 

And last month, a Hong Kong regulator joined forces with Big Four firm Deloitte and a raft of banks to develop a platform that leveraged blockchain technology to streamline certain elements of trade financing. 

But one of Robinson's colleagues, Pierre Bouquieaux, product director at Temenos' private wealth management unit, does not see blockchain becoming “business as usual” within private banking anytime soon.

“We are starting to have some discussion around [blockchain], but today when I am talking to existing clients in the wealth space, it is not really a hot topic,”  Bouquieaux said.

He continued: “I'm sure it will come, but I am not seeing much movement right now. In the past 24 hours [spent at a fintech conference with more than 1,300 attendees], I have met more than 10 clients from the wealth space and not one of them has asked me about blockchain.

​“Is it a hot topic on the table right now? It doesn't seem so.”