The European Investment Bank (EIB) has just concluded its first ‘EIB Hackathon Blockchain Challenge’, which brought together 56 coders from 15 countries. The competition took place earlier this week as 12 teams were locked in a room for 48 hours during EIB’s annual forum dedicated to treasury issues. The teams competed to decipher an optimal strategy to improve banking transactions that would assist EIB and other financial institutions in updating their systems to better operate in the coming technological revolution.
Vice President of EIB Alexander Stubb considered the first Hackathon to be a great successes and shared his thoughts on the importance of blockchain in the future of the banking industry with Finextra:
“There will be major gains from the use of new technologies such as blockchain, generated from the simplification and streamlining of existing financial processes. The new perspectives opened up by digitalisation and Distributed Ledger Technology must be assessed and we must all be ready to make use of them and embark on this new venture.”
“As the EU’s financial arm, we decided to be on the active side, learn by experience and make things happen, to be a facilitator and join with our banking partners to pave the way for tomorrow’s financial industry,” said Stubb.
The EY Luxembourg team took home first prize in the competition along with a €5,000 reward. The team was also awarded a contract with EIB to help transform their proposed banking solution into a reality.
Blockchain and the Future of Banking
Historically, banks worldwide have taken polarizing positions on blockchain technology. Numerous banks have chosen to disassociate themselves with any projects having to due with blockchain; some going so far as to ban cryptocurrency start-ups from using their services. Meanwhile other banking institutions are showing a pioneering interest for getting involved in the developing market.
Metropolitan Bank, for example, announced in June that it was eager to help support crypto clients. The New York-based bank’s chief technology officer, Nick Rosenberg, said, “We’re certainly very interested in growing this vertical. We’ve learned that it’s a serious industry. There are some very smart people involved. There are some very interesting ideas coming out that could really change the way people do business.”
Thanks to crypto clients, Metropolitan bank saw a 300 percent increase in non-interest income from the previous year and garnered an additional $3.4 million in revenue in the form of foreign exchange conversion fees in the first quarter of 2018.
That same month, industry leading global management consultant firm Bain & Company reported that banks could reduce their trade finance operations costs by up to 80 percent by utilizing distributed ledger technologies (DLTs). The study asserts that traditional banking is rooted in archaic systems that will cause many banks to be left behind in the future as their modernized counterparts abandon outdated banking models in favor of blockchain based operating systems.
Hackathons Sweeping Europe
Events like the EIB Hackathon are proving to be an effective means for banks to attract young talent while simultaneously supporting company development in technological innovation. The success of these types of events has lead to an increasing number of financial institutions running similar types of competitions.
The United Kingdom’s largest bank, Barclays, has recently announced that they will be hosting an event called DerivHack in September, wherein they hope to find solutions to improve efficiency in their post-trade processing of derivatives contracts.
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