Although blockchain technology has stirred up quite a bit of interest in the credit union industry, the practical applications of blockchain for credit unions is unclear. CO-OP Financial Services and TMG announced at THINK 16 that they are commissioning a body of work by Mercator Advisory Group on blockchain technology to help credit unions better understand the challenges and opportunities that this emerging technology represents.
“We will have Mercator survey the current blockchain landscape in order to create a strategic decision framework for evaluating blockchain and other technologies,” said Stan Hollen, President/CEO of CO-OP. “CO-OP and TMG wish to support the credit union movement by creating some much needed clarity around this technology.
Both CO-OP and TMG see value in blockchain technology and the transparency and security it can offer. However, the prospect of integrating blockchain technology into the existing systems that credit unions use is a major stumbling block.
Tim Sloane, Vice President, Payments Innovation at Mercator, wrote in a recent paper that “R3 CEV, a 45-bank consortium formed to implement blockchain solutions, has decided that blockchain technology is not capable of addressing the complex use cases associated with regulated entities. This revelation should cause others to take a large step back from evaluating technology and instead invest time in determining and understanding the business problem to be solved or perhaps the value chain participants the solution is likely to displace.”
In other words, the relationship between credit unions and blockchain is complicated. Shazia Manus, CEO at TMG, suggests that other industries may be first to adapt blockchain, with opportunities for financial services to follow:
“Knowing other industries see value in blockchain, they are likely to forge ahead with developing and implementing systems to support the technology,” Manus says. “Those industries that are successful in developing and implement systems where data integrity and secure exchange of information remain unbroken will most likely pave a path for the financial services sector.”
The first of multiple studies will be completed by late summer, in time for credit unions to use during their 2017 budget planning processes. Both CO-OP and TMG will be sharing the resulting white paper with their respective clients. “Our two organizations are committed to taking a methodical approach in providing the credit union movement with the research needed to determine if there is a way to move forward,” Manus says.