American banks are in a bind. It’s hard for them to innovate with new technologies, because banks are already labyrinthine institutions and the United States is home to a heavily regulated industry. Talk to fintech experts abroad and they’ll usually comment in amazement about just how hard it is to play ball in the complex U.S. marketplace. For many, the first step towards innovation is filing a patent for new technology. Although production may be slow, fintech patents are spreading faster than internet gossip.
The Wall Street Journal reported financial institutions filed 2,700 patents in areas like blockchain technology from 2013 to 2016, which represented an 83 percent surge overall compared to three years prior. Blockchain technology is on the cusp of overhauling everything we thought we knew about financial services, from the fundamental value banks can offer to the infrastructures they use to do it. Distributed ledgers are officially the next big thing in finance.
Leading banks around the world are already keen on blockchain technology, from the Bank of England to Singapore Central Bank and China’s CITIC bank, which recently launched blockchain-based credit applications. One of Thailand’s largest banks, Kasikorn Bank, will start digitizing a huge swath of its financial contracts through IBM’s blockchain solutions by 2018.
Despite all the buzz, American financial institutions have been more reluctant than foreign counterparts to commit to production plans or public statements. JPMorgan Chase is quietly exploring blockchain technologies, including the open source platform Quorum and the ultra-private cryptocurrency Zcash. Meanwhile, with scant publicity or public initiatives, Bank of America is on a patent rampage of its own.
Bank of America has already filed dozens of patents for blockchain technologies so far, ranging from internal security tools to cryptocurrency aggregation, risk detection systems and storage, even direct person-to-person payments. A Bank of America spokesperson told International Business Times the bank has actually filed 39 blockchain patent applications in all, contributing to its national rank as the financial services company with the most patents filed.
“Keep in mind, these patents are not for the blockchain model itself, but for unique applications that we could build utilizing blockchain technology to potentially benefit customers and clients,” the spokesperson said. It’s not clear what all these technologies would be used for, or how soon they might be ready for the marketplace. However, it’s obvious Bank of America wants to be on the front lines as innovators figure it out.
“(It's) very important in the intellectual property world to reserve our spot even before we know what the commercial application might be,” Catherine Bessant, the chief operations and technology office at Bank of America, said at a CNBC event in January. The Bank of America spokesperson told IBT this bank filed around 20 percent more patents in 2016 than it did in 2015. So far, it looks like 2017 will be just as busy.
For well over a year, Bank of America has been working closely with Microsoft Azure, which just announced its own enterprise blockchain framework will be online by 2018, to explore blockchain solutions for supply chain finance. The spokesperson told IBT his bank is particularly interested in decentralized possibilities.
Many bitcoin enthusiasts laud cryptocurrency’s ability to facilitate transactions, storage and contracts without needing a central institution like a bank at all. Rather than fear obsoletion, Bank of America is staking its claim and reconsidering the value it can offer customers.
“We are keenly focused on the fact that blockchain technology does not rely on central banks and traditional clearing houses,” the spokesperson said. “Customers and clients have high expectations when it comes to the reliable transmission of funds, protection of their information and access to a fair cost structure, as they should. To move forward, those and numerous regulatory topics and issues will need to be addressed.