BBVA issues corporate loan using blockchain
Spanish lender becomes first global bank to use the technology for corporate loans
Spain’s BBVA has become the first global bank to issue a loan using the distributed ledger technology that underpins cryptocurrencies and has the potential to revolutionise banking processes.
BBVA said it carried out the entire process for a €75m corporate loan — from negotiating terms to signing the loan — on a mutually distributed ledger that kept both the bank and borrower up to date on the loan’s progress.
The process cut the negotiation time for the loan from “days to hours” and BBVA hailed it as a “significant advance in the exploitation of [distributed ledger] technology” not just in banking but in the way private and public blockchains can interact.
“Blockchain can offer clear advantages for all sides in the corporate loan market in terms of efficiency, transparency, security,” said Carlos Torres Vila, BBVA chief executive.
“It’s another strong example of how disruptive technology can be used to add value to financial services, something that is central to our strategy.”
He added that the bank had “several more transactions in the immediate pipeline”, in addition to the pilot completed with Spanish telecoms company Indra, which describes itself as “at the vanguard” for blockchain applications.
Borja Ochoa, Indra’s director of financial services, said blockchain was “destined to become one of the technologies that will change the way we interact with products and financial services” and that the pilot “strengthens the position of BBVA and Indra as leaders in the practical application of blockchain technologies.”
Blockchain is regarded as one of the most promising fintech themes for banks and has a broad range of applications across payments, clearing and settlement, trade finance, identity and lending.
The main advantage of blockchain over existing processes is its ability to speed up and simplify complex transactions by making changes and updates immediately visible to all parties. A single blockchain-based system is also cheaper to maintain than the myriad of systems banks use for transactions now.
In the lending market, blockchain has more potential in corporate and syndicated loans than in consumer loans, because corporate and syndicated lending is more complex and records need to be accessed by a broader range of people than the single borrower typically involved in consumer loans.
For its pilot project, BBVA used a private blockchain for the negotiation and completion process, and then registered the completed contract on Ethereum’s public blockchain.
“BBVA is involving its clients in project processes such as requirements definition, development and implementation,” said Ricardo Laiseca, BBVA’s head of global finance for corporate and investment banking. “In this way, BBVA provides its customers with not only the best financial solutions, but also the most advanced technical and innovative capabilities.”
BBVA, which reports first-quarter earnings on Friday, is also working on blockchain initiatives for international payments, international trade and foreign exchange.
The bank, and its septuagenarian executive chairman Francisco González, has been a zealous adopter of new technology and business models, and has invested in a number of new ventures including the UK’s Atom Bank and German fintech solarisBank.