Global payments company Western Union has today unveiled plans that will see it develop an implementation of existing services with Coinbase, one of the world’s most prominent cryptocurrency exchanges.
The pilot was announced by Western Union’s CTO David Thompson at an event in Madrid this week. Distinguished by his own career, which has involved mining bitcoin directly, the news only added to the hype in the aftermath of his presentation.
While discussions focused on whether the blockchain will ultimately come to replace the remittance sector, something Thompson believes is unlikely in the long term, his nevertheless positive approach to the underlying technology can be interpreted as another vote of confidence in the blockchain.
The news follows on from a previously unsuccessful trial arranged by Western Union in partnership with Ripple. While uptake on that pilot was lower than Western Union expected, the newly announced pilot with the Coinbase infrastructure seeks to streamline key compliance processes as part of the financial industry’s know-your-customer obligations (KYC).
However, while the trial will look at the potential of the technology for Western Union’s business, digital currencies will remain excluded from any eventual platform. According to David Thompson, this could only be considered after the regulatory picture around digital currencies has fully materialized.
“Until digital currencies become regulated and integrated into the law, we are not going to include that on the platform. Our regulators are quite direct with us; it’s not something they are allowing us to enable.”
The project will be monitored closely by financial businesses with KYC obligations to fulfill. Currently a complex and bureaucratic process facing businesses onboarding new customers, it is thought that in the case of Western Union alone there are savings of up to $240 million annually available from this type of technology.
A blockchain-based solution should be able to make it easier for companies to automate these processes, reducing much of the costly administrative burden they face at present.
Smart contracts and real-time payment settlement are other areas the firm intends to explore through its experimentations with the blockchain.
It comes at a time when financial service firms, central banks and regulators across the world are turning to the technology, which many believe could hold fundamental reforms of the global financial system in the years to come.