Just as JP Morgan Chase did before it with JPMCoin, Wells Fargo will be investigating the possibility of using the blockchain to handle its massive internal settlements. Its product will be called Wells Fargo Digital Cash and will soon be tested in a pilot process, followed by a real launch in 2020.
Every day, the bank, like most major banks, processes billions on its internal ledgers.
Moving large sums of money is precisely what a blockchain can be good for, especially if your bank backs and guarantees the token issued.
Even for banks, moving large sums of money internationally can be an expensive proposition. Wells Fargo is no different in this respect, and like JP Morgan, it can save a great deal of money by integrating a blockchain solution.
The obvious question, though, is where is Ripple, Stellar, or the other industry heavyweights who supposedly aim to do exactly this, for exactly this type of customer?
The move demonstrates a fundamental weakness in the Ripple strategy: there’s absolutely nothing stopping banks from simply creating their own blockchain solutions.
So Where Is Ripple?
In so doing, banks are saying: we’re into blockchain, just not Ripple, or anything else, that might have served us.
There’s no reason for Ripple to be upset. Banking is a massive, multi-trillion dollar industry, and Ripple doesn’t have to capture the entire thing in order to be effective.
In fact, with just one or two major banks, and a lot of little ones, Ripple’s use case could still prove out. It’s worth noting, in the same breath, that their prospects actually look better than that, with networks of banks signing on every year.
Wells Fargo dropped a press release on the subject, in which they said, in part:
“DLT provides a permanent, highly secure and trusted record of transactions. Wells Fargo Digital Cash will run on DLT and will help Wells Fargo achieve near real-time money movement without impact to the underlying account, transaction postings or reconcilement infrastructure with international transactions (where platforms and process differ). Wells Fargo global locations will be able to exchange funds in expanded operating hours without limitations from traditional posting infrastructure or differences in infrastructure across the network. Final settlement will occur without the need for third parties, reducing transfer time and costs. Corporate clients will not have to change their payment processes, cash management responsibilities or relationship management practices to benefit.”
At no point, so far, has Wells Fargo mentioned whether or not Wells Fargo Digital Cash will ever be made available to consumers.
Banks Want Blockchain
For banks, the appeal of blockchain is obvious: save money transmitting across borders. This can be one of the most expensive endeavors for a bank, and large banks must do it on a daily basis.
Blockchains, however, can be ignorant of borders. Therefore, in this respect, even something like Bitcoin, with relatively high fees, can be superior to traditional banking methods, if the liquidity is there on the receiving side.
Wells Fargo has reportedly already used its new technology to move money between the US and Canada. From there, the sky is the limit.