D+H: 2016 will see banks really adopt blockchain solutions

DH+H, a Canada-based company that provides technology solutions to financial institutions, recently announced the addition of a private blockchain solution to its payment hub Global PAYplus.

The move makes D+H the latest payment provider to offer blockchain-integrated services, following similar announcements from Dwolla, Earthport and PayCommerce, marking a turning point in blockchain’s march from innovation labs to the real world.

For example, the Global PAYplus platform already provides a large number of instant payments by combining different payment methods, currencies and systems into a single payment hub, and D+H may soon launch a ‘blockchain’ to provide more options beyond traditional payment methods.

Moti Porath, executive vice president of global pre-sales at D+H, said the advantages offered by blockchain and “virtual billing” technologies are that they enable banks to simplify and reduce associated clearing costs and can further “achieve the goal of instant payments.”

He said that making D+H an early adopter of the technology would likely allow for quick transactions:

“We believe that 2016 will see banks move from experimentation in innovation labs to implementing solutions that deliver value to their customers. At that point, we will see blockchain’s most relevant capabilities in payments, which will further accelerate the adoption of blockchain in global payments.”

While blockchain is still not being used for lifestyle spending, Porath told us the company is currently “in discussions and trials with certain clients.”

While he could not reveal the names of those clients, he expressed hope that there would be major news announcements in the near future.

Using blockchain nodes as central banks

Porath said the addition of the blockchain solution demonstrates that Global PAYplus is “adaptable to blockchain technology” and is further integrating the technology to meet the evolving payment needs of peer-to-peer (P2P) customers.

He framed the project as a means to simplify the way banks run, operate and provide payments, saying:

“These institutions will be able to leverage a secure, closed loop from distributed ledger systems to connected banking networks, enabling real-time fund transfers and increased liquidity.”

According to Porath, the company’s blockchain integration will support credit and debit transfers, as well as chargeback and rejection services, and will be suitable for instant payment settlement solutions and inter-departmental transfers.

The only prerequisite, he added, is that members of the scheme will run it as a private network.

As for the detailed working principle of the system, D+H management said that a node was established in the network to serve as a liquidity pool, which, along with various other liquidity pools, is funded by actual external transfers (for example using SWIFT).

“The liquidity pool nodes simulate the central bank’s account situation, and when value is exchanged and blocks are being updated, the ‘central bank’ nodes are updated to reflect the exchange of value,” he explained.

DIY Efforts

Notably, D+H partnered with Ripple in October last year to provide “innovative payment capabilities,” although this new blockchain product was built entirely in-house.

Porath told CoinDesk the new multi-chain, private blockchain solution will be built with open standards and could provide a path to “any number” of instant payment settlement systems.

As for why the company did not adopt Ripple or another existing blockchain solution, he explained that the company believes that distributed ledger technology will have a large market in closed private networks rather than large open networks.

“If this technology can be combined with payment hubs, it can provide a more secure environment and faster and more efficient fund transfer and settlement services,” he said. “At the same time, it can protect the privacy of transaction participants.”

Providing a solution that complies with regulatory requirements, such as know your customer (KYC) requirements, is also a factor.

Advice to the Industry

Notably, D+H recently released a white paper laying out five key principles that the company believes the banking industry needs to follow to gain blockchain rights.

The company said it was “encouraged” by the potential positive impact of blockchain in the payments industry, but also reminded banks that there are five key points that must be carefully addressed in order to fully realize blockchain’s potential.

Key considerations in the document include identifying and resolving access issues and preserving the technology's potential for reform.

“If the past year was a time of experimentation and innovation for banks with blockchain, the coming year will be when the technology emerges from behind the scenes at banks to solve real business problems,” Porath said in the white paper, adding:

“However, this technology must be afforded the right to fulfil its promise to allow for reform.”