Tag Archives: R3CEV

Bankers Battle Banks

By Barry Elias | Friday, 09 Oct 2015 07:27 AM

Newsmax_Image_100915_BanksBattleBanks
Bank profit margins are expected to decline at an accelerating pace over the next five years as bankers team up with technology firms to provide more cost-effective products and services.

Technological competition is expected to reduce profits from non-mortgage retail lending, such as car loans and credit cards, by 60 percent and revenues by 40 percent over the next ten years. Profits and revenues for mortgages, wealth management, small and medium-sized lending, and payments processing are also slated to fall between 35 and 10 percent, and earnings on some financial products may decline by nearly two-thirds, according to McKinsey & Company, a global management consulting firm.

Technology firms are focusing on the most lucrative segments of bank portfolios, especially those that involve customer relations. This will return banks to their roots as a utility: one that manages balance sheet assets and liabilities. McKinsey says banks generated $1.75 trillion of revenues in 2014 from origination and sales activities, earning a 22 percent return on equity, compared with $2.1 trillion of revenue and only a 6 percent return on equity for managing balance sheet net interest.

McKinsey calculates banks earned a record $1 trillion last year with a 9.5 percent return on equity. Nearly two-thirds of banks in developed markets and a third of those in emerging markets earned a return on equity below the cost of equity, causing their equity prices to fall below book value.

McKinsey expects this rate of return to plummet rapidly as bankers continue to enter technological finance as advisors, investors, board members, and company executives, such as former JP Morgan executive Blythe Masters, who is the current Chief Executive Officer of Digital Asset Holdings, a start-up that provides ledger and settlement services for digital and mainstream assets.

Thirteen more banks are now collaborating with R3CEV, a New York based start-up to develop a private, distributed ledger system for financial institutions, bringing the total to twenty-two financial institutions. In contrast, the bitcoin blockchain platform permits access to all and is secured by a digital token.

These 13 banks are: Citigroup, Bank of America, Morgan Stanley, HSBC, Bank of New York Mellon, Deutsche Bank, Mitsubishi UFJ Financial Group, Commerzbank, National Australia Bank, Royal Bank of Canada, SEB, Société Générale and Toronto-Dominion Bank.

Nasdaq is also using the blockchain to set up a private share trading platform with Chain, a start-up that has received funding from Nasdaq, Citi Ventures and Visa.

The bitcoin blockchain methodology ensures more timely, efficient, cost-effective and secure asset ownership transfer. This will be especially useful for the syndicated loan market, where settlement can take 20 or more days to finalize.

The New York State Department of Financial Services recently approved two firms to operate Bitcoin exchanges: Gemini, founded by Cameron and Tyler Winkelvoss, and ItBit. The Wicklevoss brothers are also working on a bitcoin-backed exchange-traded fund, which is expected to trade on the Nasdaq exchange and awaits regulatory approval.

Banks are beginning to brace for the coming seismic shifts of the financial terrain.

© 2015 Newsmax Finance. All rights reserved.

Banks Bank on Saving Billions Using Bitcoin Blockchain

Newsmax_Image_092515_BanksBankonSavingBillionsUsingBitcoinBlockchain

By Barry Elias | Friday, 25 Sep 2015 09:36 AM

Banks are investing millions of dollars in the development of the bitcoin blockchain technology in the hopes of saving billions of dollars down the road.

Nine investment banks are collaborating with start-up R3CEV, a New York-based group of trading and technology executives, to develop governing standards and procedures to implement a more effective and efficient settlement system for asset movements between counterparties. They have invested several millions of dollars in seed capital with R3CEV thus far for the research, experimentation and design of prototypes.

The blockchain methodology is viewed as an instant, real time update of payment ledgers in multiple locations without a single, centralized authority overseeing the process. Banks, financial exchanges, and settlement clearinghouses are exploring how to harness this technology for the automatic execution of contracts that could potentially save billions of dollars in bank operational expenditures.

The nine investment banks are Goldman Sachs, JPMorgan, Credit Suisse, Barclays, Commonwealth Bank of Australia, State Street, RBS, BBVA, and UBS. Many banks, including Barclays and UBS, are working toward their own blockchain model or partnering with other start-ups, as a way to hedge their bets and align with the best possible option in the future.

Advocates of this industry collaboration point to the successes of other ventures such as the Depository Trust Clearing Corporation, to clear trades for corporate stocks and bonds, municipal bonds, and money market instruments; the CLS, to clear funds for global currency trades; and the Society for Worldwide Interbank Financial Telecommunication (SWIFT), a global financial messaging system.

Circle Internet Financial recently became the first firm to be issued a BitLicense by the New York Department of Financial Services (DFS), permitting it to offer digital-currency services in New York. The company was founded two years ago and backed by Goldman Sachs.

The DFS said 22 firms applied for the license, including CoinSetter, Consensys, Gemini (founded by Cameron and Tyler Winklevoss), ItBit, and Symbiant, and it expects more approvals shortly.

The BitLicense was originally introduced by then- DFS Superintendent Benjamin Lawsky in January 2014. The license allows digital-currency firms to expand their services while protecting clients with anti-money-laundering compliance and cybersecurity protocols.

Circle is able to offer mobile payment services to receive, hold, and send U.S. dollars and bitcoins via text messaging that does not require conversions from one form to the other.

Circle is pursuing this same option with other currencies, such as the euro.

There seems to be no turning back from bitcoin.

© 2015 Newsmax Finance. All rights reserved.