Why Rabobank's Blockchain Cross-Border Tool Isn't Just a Database

Dutch multinational bank Rabobank today announced a cross-border payments tool built on Coin Science's multichain distributed ledger.

Developed in partnership with financial technology provider D+H, the new project envisions how distributed ledger tech could enable more than a faster way to move money.

In addition to the cross-border payments functionality, the blockchain tool notifies recipients before taking any actions so they can decide if they want to receive the money and in what form. Then, it lets the bank's independent affiliates work from a shared accounting ledger.

Rabobank's manager of channel support and payment engines, Heimen Schuring, said that by verifying the account information is accurate prior to accepting the funds, his company will be able to save money on what he calls "repair," or trying to figure out what went wrong in a transaction.

Schuring told CoinDesk:

"When we're sending dollars, we can choose to put it in to his dollar account, or convert it to the euro account. With the pre-notification, we can learn pre-processing if the account is still available."

Schuring estimates that 60% of repair expenses are now avoidable as a result of the multichain implementation.

Not just a database

Instead of a consortium-based model where multiple banks or other financial entities each manage a node, Rabobank owns and operates every node in the multichain implementation.

While an internally managed blockchain owned by a single entity might start to look an awful lot like a souped-up database, Gene Neyer, head of product management and global payments at D+H, argues it's still fundamentally different.

Specifically, he noted that while a database is general purpose, workflows specific to the way Rabobank operates can be coded into a distributed ledger. Further, he says its ability to be replicated easily acts as a deterrent against fraud.

"That is a much more powerful thing than a database," Neyer told CoinDesk, adding:

"Databases are still vulnerable to the database administrators, to internal fraud, whereas blockchain, by design is an immutable record."

Ready for action

Though the service was unveiled as a proof-of-concept, Neyer said the technology is ready to be implemented whenever Rabobank is ready.

"It's really question of when is the bank comfortable with it and what will they discover as they continue to use this technology," he said.

The blockchain set-up is also customizable so it could be used to facilitate communication between banks around the world or even between departments within a single company.

He concluded:

"It is an example of what I would call an efficiency play within the bank. They are not really transforming a particular slice of the industry, but they are making themselves more efficient, more effective, more responsive."

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