Large multinationals and international banks maintain funds in multiple countries and in multiple currencies. These funds are managed using traditional internal accounting systems. By exposing these accounting systems through a controlled application, as with a blockchain or distributed ledger, the value of those funds can be moved between locations much faster, and now Wells Fargo has entered the fray:
“Giants like Facebook, JPMorgan Chase and Walmart are all pushing blockchain for myriad use cases, and now Wells Fargo has joined the fray with its own spin on the distributed ledger technology.
The announcement, outlined in this American Banker article, sets expectations:
“The choices of real-time payments and cross-border transactions as the first transaction types puts Wells Fargo squarely in the center of the current competition for distributed ledgers.
Wells Fargo will use Digital Cash to complete internal book transfers of cross-border payments within its global network. The international locations can exchange that digital cash among themselves. Wells Fargo has executed transactions between the U.S. and Canada, and the internal distributed ledger network will be a “reusable enterprise” for Wells Fargo to build and deploy multiple distributed ledger applications.”
These expectations are slightly tempered by the somewhat vague timeline:
“A pilot based on USD transactions will start in 2020, and will later add support for multiple currencies and will work across Wells Fargo’s global branch network.
The desired benefit is faster payments, which are necessary for international e-commerce and digital supply chains. These require smaller-value, more frequent payments than the larger transactions that dominated traditional corporate supply chain finance.”
Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group