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Bank of America's (BofA) tech and operations chief, Cathy Bessant, has expressed skepticism on the benefits of blockchain, despite the bank having received or applied for 82 patents for the technology, the most among financial institutions (FIs), per CNBC.





Business Insider IntelligenceBessant said BofA's patents could allow the bank to plug into blockchain if the need arises going forward. However, she said that she has the most reservations about public blockchains, such as the one used by Bitcoin; she added that private blockchains could potentially enable FIs to cut costs and offer better services in the future.

Notably, Besser also stated that she hasn't seen a use case that makes a lot of sense for finance or that considerably enhances current methods.Here's what it means: Bessant's comments add further fuel to the ongoing debate about the prospects of the technology.

• Some players have demonstrated use cases for blockchain, but questions of its scalability still remain. In February, JPMorgan unveiled plans to launch its own crypto, dubbed JPM Coin, to transform its wholesale payments business, while HSBC said it settled $250 billion in forex trades in 2018 over blockchain and that it wants to make the platform available to its clients, such as FIs, as examples. Both use cases, however, have yet to prove they can scale.
• Others are scrapping some of their blockchain plans, struggling to find substantial value when compared to existing methods. For instance, earlier this month, Citibank announced it's abandoning plans to launch its own crypto, having decided it would create greater value by focusing on improvements to current payment ecosystems, like SWIFT.

The bigger picture: Blockchain is still a nascent technology, but funding continues to pour into the tech and FIs are narrowing in on certain opportunities.

• Despite lack of significant success, money continues to flow into the technology, indicating hopes for more significant results in the future. Financial services firms are spending around $1.7 billion per year on the technology, according to Greenwich Associates, while VCs invested $5.4 billion into blockchain startups in 2018, up 260% YoY, per Autonomous Research cited by CNBC.

• We've already seen some promising applications of the technology. Trade finance, for instance, is well suited for blockchain disruption, bringing benefits such as reduced processing times, transparency, and real-time review and approval of financial documents. And when Citibank announced that it's abandoning its crypto plans, it also said it will continue to experiment with blockchain in trade finance. Further, many large banks belong to trade finance blockchain consortia, such asVoltron, an initiative led by HSBC, ING, NatWest, Standard Chartered, BNP Paribas, and Bangkok Bank.

• Blockchain within banking is in its infancy and continued investigation into its potential benefits is to be expected — but FIs should try to narrow their focus. BofA's slew of blockchain-related patents are indicative of the technology's exploratory status within the industry. It's also vital, however, that FIs' approach to blockchain adoption and innovation is driven by the problems they are looking to solve, rather than blindly following a hype and dipping their toes into all potential use cases.
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