J.P. Morgan, the American banking behemoth, has partnered with Siemens, the German engineering technology business, to create a Blockchain-based new remittance system for the latter. The company requires an infrastructure that can handle a rising volume of transactions, and blockchain proved to be the ideal answer.
According to the Financial Times, Siemens collaborated with J.P. Morgan to increase the automation of its payment system, becoming the bank’s first anchor client of Onyx, Siemens’ blockchain unit. This will enable the German corporation to do financial transactions in US dollars within its accounts, which they both hailed as a first-of-its-kind application. There are plans to incorporate the ability to pay in euros by 2022.
This payment infrastructure was created to automate the recording and verification of transactions. The capabilities of digital technology vastly outstrip those of analog ones. During an interview with the Financial Times, Heiko Nix, the German industrial firm’s head of cash management and payments, stated:
If the business would stay the same as it is today, I would say we are fine regarding our treasury set-up. We can automate a bit and maybe we reduce costs and cash allocation … This is not the reason why we are doing this. The reason is that we are seeing a huge change due to the emerging digital business models, because we will no longer be able to forecast cash, for example.
Onyx’s worldwide head of coin systems, Naveen Mallela, added that the technology enables automatic transitions such as direct debits and standing orders to advance beyond present norms. “You want more flexible rules or triggers, and that’s where the current infrastructure falls short,” Mallela explained.
This statement recognizes the current tendency among banking titans and big institutions to use blockchain technology due to the significant developments and benefits for day-to-day operations, payment rails, and the cross-border payment settlement process.
J.P. Morgan claims that several clients are eager to test their blockchain-based system, but Siemens will be the first to do so.
Some banks that have acknowledged implementing blockchain technology this year include Citi, Wells Fargo, US Bancorp, PNC, Fifth Third Bank, and Signature Bank. Wells Fargo and HSBC, for example, recently announced the use of Core-FX distributed ledger technology for cross-border settlement of transactions, including the US currency, Canadian dollar, British pound sterling, and Euro.
This trend is projected to accelerate since it represents a rapid evolution of payment infrastructure, and businesses will not want to be left behind.
