Less hype and more collaboration: how Barclays is exploring blockchain technology

10 July 2019

As blockchain technology continues to cause major disruption in the financial sector, Dr Lee Braine, of Barclays’ Chief Technology Office, considers how the bank is redefining both its products and processes – and why it is “cutting through the hype” to deliver tangible benefits to customers.

Blockchain has changed the way people think about money. Barclays started exploring how to leverage the technology over four years ago because of the wide number of potential applications the bank saw in it, way beyond blockchain’s best-known application in cryptocurrency.

Dr Lee Braine, of the bank’s Chief Technology Office, explains: “Our role is to cut through the hype and identify where the real ‘diamonds’ are. Our focus has been on identifying the use cases for blockchain that will change the way we do business for the better, by simplifying processes and removing inefficiencies across our industry – ultimately for the benefit of our customers and clients.”

Collaborating to make blockchain viable

The prevailing view is that blockchain will cause two main shifts in the way Barclays does business. The first is in its broad potential to bring financial institutions closer together and make global collaboration easier. The second is by creating real efficiencies in the way the bank processes data.

“To some extent, the first shift around industry collaboration is already happening,” says Braine. “This was partly because the initial hype around blockchain and cryptocurrencies created a ‘fear of missing out’, but mainly because the investments needed to create new industry systems only really have viable business cases when the industry collaborates.”

Among other collaborations, Barclays has recently announced that it is one of the investors, along with other major financial institutions, in the creation of Utility Settlement Coin, a new digital cash instrument that is implemented on distributed ledger technology and connects commercial bank money to central bank money. The aim of this venture is to introduce greater efficiency and reduce risk in wholesale markets.

“The second shift is in product and process innovation,” says Braine. “Barclays has explored many interesting uses for blockchain: these include the simplification of payments infrastructure, the use of smart contracts to standardise post-trade processes, and efficiently connecting parties in trade finance and syndicated lending.

“For us, the real value of blockchain lies in the substantial improvements to data processing that can occur when the systems at different institutions, which previously required inefficient reconciliation due to variations in their different internal processes and data formats, can now remain synchronised automatically through distributed ledger technology. The prize on offer as we solve these types of problems could amount to billions in industry savings.”

Defining the industry standards for blockchain

Clearly, there is enormous potential in the future of blockchain. But, as an institution with over 325 years of history, Braine says that Barclays’ role is to go beyond exploring the different applications of the technology.

Nicole Sandler, Head of Innovation Policy, explains: “We see our role within the blockchain ecosystem as not only an innovator pushing the technology forward, but as an incumbent using our experience to ensure that every use case is fit for purpose and safe for clients, customers and wider society.”

Lee Braine

Dr Lee Braine, of Barclays’ Chief Technology Office

Sandler is one of only three banking representatives sitting on the EU’s expert group on Regulatory Obstacles to Financial Innovation and, with other Barclays colleagues, works closely with regulators across the globe to define what bespoke rules are needed for every new use of blockchain.

While blockchain technology itself is not regulated, the different applications of the technology require different sets of rules.

One way to test and learn is through the use of a ‘sandbox’. This is a tool created originally by the Financial Conduct Authority and now adopted worldwide, that allows the testing of innovative new ways of using blockchain in a safe space, with the ultimate goal of understanding what is and is not permitted within regulatory rules.

Blockchain beyond banking

It’s not just Barclays and the other biggest banks that are experimenting with new uses of blockchain. There are an increasing number of fintech startups leading the way in leveraging the technology in innovative ways.

Many of these companies, including Crowdz, Capexmove and Synswap have graduated from the Barclays Accelerator, powered by Techstars, programme – a global network dedicated to helping fintechs scale up and deliver breakthrough innovations. 

We see our role within the blockchain ecosystem as not only an innovator pushing the technology forward, but as an incumbent using our experience to ensure that every use case is fit for purpose and safe for clients, customers and wider society

Nicole Sandler

And blockchain is also changing life beyond financial services. In aviation, for example, it’s changing the way people buy plane tickets, and in healthcare, it’s helping to make storage and access to medical records safer and more efficient.

For Barclays’ customers and clients alike, the innovations from these companies will mean quicker and more secure services, and the efficiencies that could result in cross-sector blockchain adoption could also see falls in the costs of doing business – as information can be securely synchronised in real time. 

“Has blockchain been over-hyped in the last few years? Probably,” says Braine. “However, when you cut through the hype, what is clear is that this technology will provide tangible benefits in the day-to-day lives of us all. As long as we all collaborate, which is ultimately one of the underlying principles of blockchain.”