At this point, the whole financial and commercial ecosystem is starting to realise that change is inevitable. Like many things in life, deviation from the norm is necessary for progress.
Let’s accept it, current credit mechanisms come with unreasonable associated costs plus, they are time-consuming and complicated. The whole lending industry needs a huge change. Digitalisation is invading the market of every financial product, and banks know it. From UBS, HSBC, Goldman Sachs, and JPMorgan, they are all looking for ways to profit from the benefits of blockchain tech.
In 2019, the biggest financial institutions in the world have found a goldmine: crypto-lending facilities and crypto-derivatives. By using blockchain, banks are massively reducing costs and multiplying their revenues. Many researchers estimate that the alternative lending industry will loan to around 20% of small businesses by 2020. In addition, PwC affirms that global investments in FinTech have tripled from 2014, with more than 60% of investment banking CEO’s now believing that blockchain will strategically important to their organisation.
By jumping on crypto products, banks are exploiting new market opportunities, improving responsiveness to customers, increasing the overall output and decreasing the processing time. Lenders will no longer need to pay high fees and wait up to 60 days for approval. Both, individuals and small businesses can obtain approval for a blockchain-based loan in a matter of seconds.
Loan seekers and lenders will be spectators of an exciting future. A future in which contracts will be validated real-time, with proof-of-funds and payment planning being done in the blink of an eye. Loan seekers will be able to jump on a larger pool of competitive financing offers, while contractors will be able to validate their transactions without the use of costly lawyers.
2019 is the year of the rise of micro-loan platforms. 2019 is also the year in which even central banks are realising that cryptos are key to rejuvenate growth. Financial giants are constantly being pressured to ensure risk mitigation, improve the settlement of transactions and find a top-notch liquidity provider… and blockchain does it all.
“Letter of Credits” are one of the oldest bank instruments in the world, allowing global trade to transform and evolve since Medieval times. Nonetheless, manual paper-based processing, high operating costs and slow transaction delivery times are drowning the possibility of improvements. As a result, blockchain developers have found a way to move to a more data-driven trade and financial system, a system able to surpass national borders, guaranteeing efficiency and scalability.
Cryptonary’s latest article covers one of the recent use cases of those blockchain-based letters of credit. This week the Asian giant HSBC has completed the first Yuan-denominated letter of credit transaction via Voltron blockchain platform a company that uses blockchain technology to reduce the time it takes to execute the entire process of paper-based lines of credit. Those new bankers commercial credit could transform international trade as we know it. The Voltron platform was initially developed by eight of the biggest banks in the world: BNP Paribas, CTBC Bank, ING of France, Standard Chartered, and HSBC, Natwest, SEB and Bangkok Bank.
Voltron is not the only platform competing for the “pioneer” title. Marco Polo, Wilson, and WeTrade are also in the list. Those trade consortiums are unifying knowledge, technology, and architecture to meet their objectives. Consortiums among financial giants are becoming increasingly popular, as they can leverage their crypto-derivatives and alternative lending facilities by working together.
Do you remember when was the last time that banks and other financial institutions gathered efforts to leverage their services? It was in 1970 when the international system started to adopt the SWIFT system. Interbank alliances are back in the game, but this time to welcome facilities ten thousand times more disruptive than SWIFT.
The “Kongo” platform is another useful example. The 15-banks consortium is targeting trade finance for commodities by issuing digital Letter of Credit which will allow commodity houses to submit digital trade documents. The Geneva-based initiative is integrated by banks such as BNP Paribas, Citi, CréditAgricole Groupe, Gunvor, ING, MUFG Bank, Natixis, Rabobank, SGS and Societe Generale.
Binance, the world’s largest cryptocurrency exchange, has also jumped into this new crypto-lending and crypto-derivatives boom. The platform has partnered with Cred, a company that has provided more than $300 million in credit facilities. In an article published a few days ago, the Cryptonary team covered the benefits of the newest product by saying “the crypto lending service will guarantee participants a 15% return, regardless of market conditions. The launch will include 3 tokens – Binance Coin (BNB), Ethereum Classic (ETC) and stable coin Tether (USDT)”.
Salt lending( based in Denver, Colorado) and Tavalor (from Chicago, Illinois), are using blockchain’s flexibility to offer cash loans that leverage digital assets. Both Salt and Tavalor are also connecting investors and business owners on their lending platform, allowing loan seekers to lock into responsible credit lines using smart contracts and immutable audit trails.
The World Bank has made active moves not to get left behind. The prominent international body will start to grant financial support by the issuance of a blockchain-operated debt instrument. The bond is certainly the first of its kind and promises to bring enormous benefits to the traditional banking industry. In 2018, the World Bank and CommBank (The Commonwealth Bank of Australia) made an alliance to work together in an innovative financial product. The titans teamed up to create a register of the bond market using blockchain technology. The Ethereum-based blockchain will be able to sell huge amounts of debt by using an interbank network, as well as many corporations.
All in all, there is no question that Crypto-lending and crypto-derivatives are part of the so-called Fourth Industrial Revolution or Industry 4.0. We live in exciting times and if you haven’t figured out yet how to benefit from the latest financial instruments, you should start to find out!