Tech 15 February 2019

Dan Taylor

HSBC slashes forex costs with blockchain

HSBC has dramatically reduced its costs for trading foreign exchange, as a direct result of its blockchain-based trading system, according to one of the company’s executives.

Reported in Reuters, the firm confirmed it had reduced costs for its forex business by as much as 25%, in what analysts describe as an example of the importance of distributed ledger technology to banks and their bottom lines.

The bank handles anywhere up to 5,000 foreign exchange trades a day through its FX Everywhere platform, totaling as much as $350 billion in daily volumes, according to some sources.

The London-based bank has processed $250 billion on its blockchain platform over the last year, with the cost savings reflecting the significant efficiency gains delivered by blockchain.

HSBC’s blockchain platform is an example of a major global bank putting blockchain into practice, with the scale of the savings so far a promising sign for HSBC and other banks preparing to launch similar blockchain systems.

Mark Williamson, chief operating officer of FX cash trading and risk management, said the results show the system works at scale. He noted, “We going at a pace now. We’re able to demonstrate that this is not a one-off proof of concept or just one or two trades.”

While HSBC is remaining coy on the volumes processed through the new system, it described the amount as “a small proportion” of their activity.

Nevertheless, the savings could indicate substantial cost reductions across their full portfolio, and the bank are keen to explore a further rollout of the technology to reap these benefits.

Mainstream financial institutions have been more cautious are cryptocurrencies and blockchain technology, with many not yet ready to embrace the full potential of the technology. Particularly within banking and other financial sectors, blockchain has already proven itself a transformative technology, albeit in the few instances in which it has been successfully deployed to date.

While banks continue to tie up intellectual property around blockchain systems, most notably Bank of America with its 50 blockchain patents, these systems remain underdeveloped and underused, relative to the capabilities of the technology.

The HSBC example is likely to serve as a case study to other banks as to how they can reduce trading and admin costs through blockchain technology. It remains to be seen how quickly others follow suit.

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