Finastra, one of the world’s largest FinTech companies, has added three French Banks to its lending consortium that runs on a distributed ledger. SocGen, BNP Paribas, and Natixis have joined NatWest on the DLT platform that went live in October 2018, as announced on their website on May 14, 2019.
France Joins DLT Brigade
Finastra has added three of the largest French banks to its newest product offering – a lending software that is enabled by distributed ledger technology.
The marketplace, which is enabled by input from BNY Mellon, State Street, BNP Paribas, HSBC, and ING aims to bring more transparency and efficiency to the current loan market by reducing manual capabilities and automating a large portion of the process.
Using this, banks are able to publish lender specific information that is drawn from their internal loan agency platform which is also designed by Finastra. By integrating both of these platforms, banks can improve risk management and due diligence when issuing a syndicated loan.
Phillip Boulas, head of global corporate banking, was quoted on the recent event, saying:
“With the creation of this community and a collaborative mindset we have a unique opportunity to tackle the operational pain points we have all been experiencing for years and that constrain syndicated loan market expansion.”
Decentralized Finance as a Competitor to Banks
The rise of decentralized finance has been a fairytale of the last year or two; from having virtually no functioning lending platforms to the rise of MakerDAO and Dharma, the entire industry has come a long way. The Ethereum community, in general, is playing a very big role in developing decentralized finance; MakerDAO, Dharma, and many other lending platforms are built on the Ethereum blockchain.
Other than lending, Ethereum’s decentralized finance initiatives can be segregated into nearly 11 categories – the most of important of which are KYC, insurance, infrastructure, payments, and exchange/liquidity services.
By removing the trust factor, it is possible decentralized finance will become a preferred medium of loan acquisition for business and individual customers alike. But collateral for a loan major set back in this; for example in MakerDAO, your collateral is Ethereum’s which is a very volatile asset – if the value of Ethereum spirals downward, you can hold the DAI and default on the contract.
Obviously, this isn’t ideal but it reinforces the notion that paying back the loan has no major consequence – in a few instances the lenders end up losing big time.
While decentralized finance is picking up, the lending component needs a lot of work to become a platform with effectiveness on par with traditional finance. With traditional finance coupling with DLT, it may prove extremely difficult to match their functionality.