Wells Fargo And Mastercard On Blockchain: Oversold?

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Along any avenue of technology, there is hope … and there is hype … and then there is reality.

Blockchain has long been in the process of being divorced – operationally as well as conceptually – from its crypto connection.

The hope has been that as blockchain moves beyond bitcoin, the decentralized way of moving data, assets and communications would find a wide berth in business. Indeed, headlines have trumpeted blockchain as a way to trade bonds and stocks, send money and execute contracts, and yet…

A bit of cold water may have been splashed on the hype, as reported by CNBC: Executives from two firms with roots in financial services and payments noted at the FinTech Ideas Festival in San Francisco on Wednesday (March 27) that the technology has not delivered how some observers had expected. The idea of an immutable system of recordkeeping, of agreement and visibility between all parties in a transaction, should have the firepower to change any number of industries. That has been the conventional wisdom, anyway.

Investors seem sanguine, as financing in the sector from venture capital firms, as estimated by Autonomous Research, has topped $5.4 billion compared to $1.5 billion in 2017. PYMNTS’ own tracking of blockchain projects reported across any number of outlets, from news reports to trade journals and even interviews with executives in the space, has found no dearth of excitement, and plenty of one-off projects. But widespread adoption proves elusive.

And it seems that even holding patents does not necessarily translate into bullishness.

As noted by Tim Sloan, chief executive officer of Wells Fargo, “blockchain has been way oversold.” And separately, as stated by Mastercard Chief Executive Ajay Banga – whose firm, said CNBC, has the “third-most” blockchain patents – blockchain’s business model is “not proven.”

Interestingly, we note, these are not just observers. Banga and Sloan helm firms that have put money where their corporate mouths are, and have invested time and effort into developing and deploying blockchain. Sloan said that though the technology has been “interesting … it’s been slow to roll out.”

That assessment comes as the programs being put in place have shown limited adoption. Consider the example of the Wells pilot with a fellow financial institution, the Commonwealth Bank of Australia. The focus has been on trade activity – and has resulted in a single transaction.

“If you turned the clock back a few years ago, it should have completely changed the industry – that’s just not the way it works,” Sloan said. “Over time, I think it’ll have an impact.”

The Mastercard executive, Banga, said that though the card giant remains “deeply invested”  in blockchain, there still is a need where “a lot of this has to improve and change over time.” The use cases that could come in the future extend to supply chains and even countering counterfeiting efforts.

Banga’s and Sloan’s comments come in the wake of similarly reserved commentary from Cathy Bessant, operations head at Bank of America, who told CNBC earlier in the week that, even with 82 patents under Bank of America’s belt, “what I am is open-minded. In my private scoreboard, in the closet, I am bearish.” She went on to say that “I haven’t seen one [use case] that even scales beyond an individual or a small set of transactions. All of the big tech companies will come and say ‘blockchain, blockchain, blockchain.’ I say, ‘Show me the use case. You bring me the use case and I’ll try it.’”

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