According to Mallela, Onyx by JPMorgan has several clients in the pipeline with Siemens becoming its first anchor client.
Wall Street bank JPMorgan Chase & Co (NYSE: JPM) has announced a partnership with German industrial group Siemens AG (ETR: SIE) to develop a payment system based on the blockchain for automatic money transfer between Siemens own accounts. This will be done in the USD for the time being pending its support for Euros next year. Siemens has seen a rising number of payments with the figures expected to go even higher as pay-per-use gains popularity among users. According to both companies, this application is a first of its kind.
In an interview, Heiko Nix, head of cash management and payments at the German industrial firm explained that the company would not have made extra effort for the upgraded automation since they are satisfied with their treasury set-up. He admitted that even if the business stays the same as it is today, they could automate a bit and probably reduce cost and cash allocation. He said:
“This is not the reason why we are doing this. The reason is that we are seeing a huge change due to the emerging digital business models, because we will no longer be able to forecast cash, for example.”
According to the report, the application will focus on the automation of various actions needed in recording and verifying payments. The infrastructure will make use of JPMorgan’s Onyx. Naveen Mallela, global head of coin systems at Onyx, hinted that the infrastructure falls short in flexibility as people want more flexible rules or flexible triggers. For now, it will take programmable payments beyond current uses like direct debits as well as standing orders.
According to Mallela, Onyx by JPMorgan has several clients in the pipeline with Siemens becoming its first anchor client. The blockchain technology has been strongly recommended to renowned institutions for its ability to improve efficiency and reduce the cost of day-to-day operations drastically. Mallela also disclosed that many financial institutions are open to discussing ways to deal with cross-border payment challenges.
“My conversations with most of the banks have [realized] that the industry needs shared platforms. It’s not about bank-specific products, it’s not about bank-specific platforms. It’s about shared, industry-wide platforms, and decentralized networks.”
It is worth noting that Onyx developed by JPMorgan which uses an industry-wide approach is not the first to solve cross-border frictions. The Bank for International Settlement (BIS) is known for taking the corridor approach. This deals with promoting cooperation among the 63 central banks that own the entity. Mallela further discloses that JPMorgan will seek to partner top clearers of other currencies to promote the Onyx. Mallela also stated that it remains to be seen how quickly they will be able to scale.
“We don’t intend to do this all by ourselves. As banks, we want to come together and create the rails, then open it up for innovation to happen,” said Mallela.