Late last year, research involving 830 large corporates found that corporate treasurers and CFOs want to use blockchain, particularly for supply chain, trade finance and cross border payments. However, the corporate view is that banks are not keeping up. The report authors east & partners and PCM warn that banks need to move faster or risk new competitors leveraging stablecoins to offer corporates the services they demand.
The researchers note that banks no longer rank as major players in personal cross border money transfers, with banks charging almost double their most expensive non-bank competitor. However, consumer-to-consumer cross border payments are just $800 billion a year compared to a B2B figure of $150.7 trillion according to EY. So there’s a lot for banks to lose.
Blockchain solutions are high priority
More than three quarters of companies said that blockchain solutions were medium or high priority for their corporate treasury teams, with China and the USA leading the way. However, there could be some bias because to participate in the research, the treasurer or CFO required some understanding of CBDC, stablecoins, blockchain or cryptocurrency.
Maintaining competitive advantages ranked as a key driver for enterprise adoption (37.6%), particularly in Asia. A quarter of large corporates see legacy system maintenance costs as a key motivation. Just over half of respondents expect blockchain to enable cheaper transactions and settlements, closely followed by speeding up transactions. This particularly applies to cross border payments for less popular currency pairs. More than a third (37.7%) expect blockchain to make transactions safer.
Corporates found several hurdles in adopting DLT solutions, with a lack of connected partners ranking highest at 45%. This could result from some trade finance platforms, such as we.trade and Marco Polo, that failed to get traction. Other significant barriers include high set-up costs (31.1%) and a lack of support from their banking partner (30.1%). They also see adopting blockchain as increasing cybersecurity risks (42%), but security risks for cryptocurrencies are perceived as far higher (70.5%).
While several questions focused on crypto payments, the researchers believe responses indicate minimal experience handling crypto payments by many treasury departments.
Lack of bank support
A small number of comments bore out a lack of bank support. One large German manufacturer observed, “Our banks aren’t especially helpful or informative, yet there is a lot of noise out there.”
A huge UK wholesaler said, “From what we’ve seen, there is quite an implementation hurdle into DLT; the banks seem to be making it up as they go along somewhat, which doesn’t make it easier.”
“We’ve been chasing our payments bank for guidance on where they are with DLT payments solutions and really haven’t had much of a response,” said a large Australian agricultural exporter. “Difficult for us to move forward without knowing how our bank is dealing with the technology.”
At Ledger Insights, we’ve seen the vast majority of bank-corporate focus on trade finance and bond issuance. There’s a lot of interest in DLT for securities settlement but less bank impetus for corporate payments, although there certainly are pockets of activity.
The report shows some treasury departments are already experimenting with stablecoins. However, stablecoins are very thinly traded apart from US dollars, which is not mentioned in the report. It raises the question of the extent to which corporates plan to use stablecoins for trade finance and cross border payments unless they’re paying or receiving in US dollars.
One handy tip that makes sense: corporate treasurers are more comfortable talking about CBDC and stablecoins rather than blockchain, DLT and cryptocurrency.