Progress reports on blockchain projects in the banking and insurance sectors offered an illuminating comparison at the Blockchain Expo in London Thursday.
While bankers came across as browbeaten and anxious, their cousins in insurance were anything but.
Indeed, the tone for banking was set on a panel looking at the potential of blockchain for financial services, where Claudia Coppenolle, head of digital market management for Deutsche Bank, began by acknowledging her belief that the hype cycle around business applications for blockchain is clearly past its peak.
“It’s heads down for delivery. People are getting close to MVP [minimum viable product] and just want to get this out,” she said. “But we still need to learn. We can’t just put a product out and hope it works. It won’t.”
As with banking, being risk averse is in the DNA of insurance companies, but an afternoon session featuring the likes of Allianz and startups such as Etherisc showed the insurance industry is not short on enthusiasm for innovation.
Etherisc co-founder Christoph Mussenbrock arguably looked further toward a decentralized future than his banking counterparts, boasting that his startup has a live product where the insurance payout is triggered by data fed to the ethereum blockchain – in this case records of flights arriving and departing.
If a flight is late, someone who has bought insurance against this risk will simply be automatically reimbursed.
Mussenbrock told attendees:
“We believe it’s not just a better database, but allows a decentralized economy. We see a shift of control toward the customer; the classic insurance model the firm controls the policy and has all the power.”
Elsewhere, there were signs incumbents are open to such creative approaches.
Oliver Volk, the blockchain expert at Allianz’s reinsurance unit, spoke on behalf of the B3i insurance consortium, which he said has been expanded rapidly, adding 23 new members to the original founding group of 15 following the first outing of a prototype for contractual management.
The group is now ready, Volk said, to invite insurance brokers into the consortium, with the latest news being the creation of B3i Service AG, a startup incorporated in Zurich that is now beginning a funding round. Volk also confirmed the consortium intends to have something in production by the end of the year.
But there were other updates as well. Allianz is also running pilots for securing electronic medical prescriptions using a blockchain, not to mention working on an internal token for moving money between affiliates around the globe, as revealed earlier Thursday by CoinDesk.
Still, Martin Baier, the program manager for business innovation and development (including blockchain) at the insurer Zurich, sees other use cases as perhaps hitting the market more quickly, predicting the first real cases for insurance would be around efficiency gains in claims processing and fighting insurance fraud.
In this way, he framed the remaining obstacles as merely finishing touches for impending launches.
“In the claims process there are lots of parties involved, so [it’s] a good area for blockchain; we just need to get our data standards sorted out,” said Baier.
But if insurers were forward-looking, panels on banking often sought to contextualize what speakers cited as the slow movement of tests and trials to production.
Herve Francois, the blockchain lead at the Dutch bank ING, for example, agreed the hype is definitely past.
“We are in the low point,” he said. “But that’s how it works – we tend to overestimate value in the short term, but underestimate impact in the long term.”
Meanwhile, Boris Spremo, operations director for emerging business and architecture at Bank of New York Mellon, said flatly that “the technology is not ready yet.”
Another barrier to bank adoption, he said, is regulation. Right now, “the regulators are cautious, especially in capital markets,” Spremo said. “And then we need critical mass” for the tech to work.
This comment compared to statements made by Coppenolle at Deutsche Bank, who elsewhere acknowledged that large institutions like hers are necessarily slow-moving.
“We are not agile,” she said. “We are a global operation and our clients have broad needs. … If our payment engine fails because we were trying out some new blockchain KYC thing, our clients would get very upset.”
Still, there were bright spots for bankers, even if the insurers stole the show.
Francois noted how ING successfully swapped €25 million worth of liquid assets using the collateral lending application of fintech startup HQLAx on R3’s Corda distributed ledger platform.
“We did this live transaction last month. We will be in production by year end. It’s been a close walk with regulators, and we are now talking to more of them in Asia,” he said.
That’s not to say insurance doesn’t have hurdles.
Matt Peterman, CEO and co-founder of InsurPal, agreed that fraud detection is an area ripe for standardization. As it stands, he said, the industry takes invasive measures to fight fraud.
Volk concluded by pointing out some differences between insurance use cases and those in banking, which hinted that perhaps blockchains are a more intuitive fit for the insurance industry.
“When you talk about blockchain and scale it’s a little bit easier for the insurance industry than in financial services,” he said. “In terms of transactions per second, we don’t have that many so that’s not really a limitation for us.”
In this way, he sought to explain the situation merely as one of two different sectors charting their own course toward perhaps inevitable efficiencies.
“We are simply starting with the easiest contracts and working forward.”
Image via Ian Allison for CoinDesk