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Five of Europe's largest insurers have formed a group to test blockchain technology in order to determine whether it can make the insurance industry more efficient, the Financial Times reports.

The group's members are Allianz, Aegon, Zurich, Munich Re, and Swiss Re. Alessandro Spadoni, Zurich's representative in the group, said that they would begin by exploring the use of blockchain specifically within the reinsurance sector — reinsurers sell insurance to other insurance companies. 

The group has said it will especially look into the use of smart contracts. These are blockchain-based contracts that execute immediately when certain conditions are met. Here's where smart contracts could be particularly beneficial in the insurance industry: 

• The selling of reinsurance. Reinsurance policies can involve huge sums of money, as well as large numbers of geographically disparate parties. And each party needs to hold the same version of the policy contract. At the moment, the distribution and updating of contracts can be a time-consuming process, and one open to human error. But a blockchain-based version of a contract would mean that each party held an identical copy of the contract, which could be updated centrally, simultaneously. This could save significant time, as well as reduce the possibility of human error. 
• Claims processing. Right now, when someone makes a claim, it has to be processed and corroborated manually by a human staffer. Smart contracts, however, can be triggered and executed automatically if specific conditions set out in the contract are met, which the contract can determine by plugging into feeds of publically available information. For example, if someone's travel insurance is arranged to be paid out if their flight is delayed by 8 hours or more, the contract can check travel information to detect whether this happens, and if it does, it will automatically verify and pay out the claim. This removes the need for manual corroboration and payouts. 
• Improving customer experience. The implementation of smart contracts in motor insurance alone could lead to annual savings of $21 billion, through automation and a decrease in processing overhead costs, a recent report by Capgemini found. Significantly, it said, these savings can be passed on to consumers in the form of lower premiums.

However, it will likely take a long time for the experiment's results to lead to any practical use. Spadoni emphasized that the group would proceed very cautiously with its experimentation, saying that the members are not yet convinced blockchain has a place in insurance, as they have not yet seen a viable use case in the industry. Moreover, he said, if blockchain is to make any change within the industry, there has to be an industry-wide network of users for it, meaning that more insurers will have to join the group. However, given the huge benefits the technology could potentially bring to the industry, and that insurers have lagged behind banks in blockchain experimentation, it is perhaps advisable to exercise caution, but not reluctance, toward this technology. 

Blockchain technology, which is best known for powering Bitcoin and other cryptocurrencies, is gaining steam among finance firms because of its potential to streamline processes and increase efficiency. The technology could cut costs by up to $20 billion annually by 2022, according to Santander.

That's because blockchain, which operates as a distributed ledger, has the ability to allow multiple parties to transfer and store sensitive information in a space that’s secure, permanent, anonymous, and easily accessible. That could simplify paper-heavy, expensive, or logistically complicated financial systems, like remittances and cross-border transfer, shareholder management and ownership exchange, and securities trading, to name a few. And outside of finance, governments and the music industry are investigating the technology’s potential to simplify record-keeping.

As a result, venture capital firms and financial institutions alike are pouring investment into finding, developing, and testing blockchain use cases. Over 50 major financial institutions are involved with collaborative blockchain startups, have begun researching the technology in-house, or have helped fund startups with products rooted in blockchain. 

Jaime Toplin, research associate for BI Intelligence, Business Insider's premium research service, has compiled a detailed report on blockchain technology that explains how blockchain works, why it has the potential to provide a watershed moment for the financial industry, and the different ways it could be put into practice in the coming years.

Here are some key takeaways from the report:

• Spending on capital markets applications of blockchain is expected to grow at a 52% compound annual growth rate (CAGR) through 2019, according to Aite Group, to reach $400 million that year.
• Banks and major financial institutions are working both collaboratively and independently to develop blockchain tech. Over 50 major financial institutions are involved with collaborative blockchain startups, like R3 CEV or Chain. And many are investing in the technology on their own as well.
• Putting blockchain to use for real-world transactions is likely not that far off. If working groups' tests are successful, firms could be using it to transact real value as early as the end of this year and we could see widespread industry application within the next few years. 

In full, the report:

• Examines the funding increases that are pouring into blockchain
• Assesses why blockchain is becoming so popular and what factors are driving up increased research and development
• Explains in full how blockchain technology work and what assets make it valuable and vulnerable
• Identifies pain points in the financial industry and profiles how various firms are using blockchain to solve them
• Demonstrates the challenges to mainstream adoption and their potential solutions

To get your copy of this invaluable guide, choose one of these options:

1. Subscribe to an ALL-ACCESS Membership with BI Intelligence and gain immediate access to this report AND over 100 other expertly researched deep-dive reports, subscriptions to all of our daily newsletters, and much more. >> START A MEMBERSHIP
2. Purchase the report and download it immediately from our research store. >> BUY THE REPORT

The choice is yours. But however you decide to acquire this report, you’ve given yourself a powerful advantage in your understanding of blockchain technology.

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The CEO of US bitcoin-payments app Circle says London remains an attractive place for startups and companies looking to expand overseas, despite the Brexit vote.

Jeremy Allaire told Business Insider: "Depending on what kind of company you're building, London remains an incredible place for talent, an incredible place for international talent, an incredible place to build global activities."

He added: "The UK government still remains the most embracing of and focused on financial technology innovation. We haven't seen evidence of other markets exhibiting the same thing yet. They've been making a lot of noise."

Marieke Flament, Circle's Europe MD, added: "There have been changes [with UK government] but the appetite for everything being digital remains very strong. Actually, we are seeing them proactively reaching out to fintech businesses. Some of the relationship needs to be rebuilt but the dialogue is ongoing."

Circle has its European headquarters in Dublin but also has offices in London. The app lets people send and receive money anywhere in the world for free by harnessing bitcoin's blockchain. US dollars, UK pounds, or euros are converted into bitcoin, transferred to the recipient's Circle app over the internet, then converted back into the local currency.

It is currently processing $1 billion-worth of transactions over its platform a year and has raised over $130 million since setting up in 2013. Circle, which is backed by Goldman Sachs, began by offering mobile digital wallets for bitcoin but launched a mainstream consumer payments product in the US last year and a UK version of the app earlier this year.

Sean Neville, cofounder of Circle, told BI: "Growth is going very, very well. We're on track to exceed number of transactions this year on an annual business.

"It's been fantastic to see the UK embrace this consumer behaviour and this way of using money with friends and family in the same way they use photos or messages or other content."

Circle's executives were speaking to BI ahead of the launch of the app in Spain and Ireland. Allaire says the Spain and Ireland launches would be the first of many in Europe.

He told BI: "If you need to make payments across the US and UK, Ireland, or Spain you essentially get no-fee, instant sending and receiving of those currencies with the best rates in the world. Eventually, we'll roll out across the whole of the EU. You'll see waves upon waves of different launches happening in the coming weeks and months."

Circle is passporting an E-Money license from Britain's regulator to expand across the EU. Allaire says he is not yet worried about the UK losing passporting rights in the process of Brexit negotiations.

He told BI: "We'll see what arrangements the UK government makes with different member states and the entire EU. But because we are an EU company [given its Dublin HQ], we have the benefit of having a lot of options as we grow and as the Brexit becomes more clear."

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Dutch bank ING launched a free mobile app in the UK on Tuesday, called Yolt, which will allow users to view all of their bank accounts and credit card information from different providers on a single platform, according to the Financial Times.

The app will be available to only 2,500 customers while it remains in beta-testing, but a full rollout is scheduled for early 2017. The launch marks ING's return to the UK market — it sold its ING Direct business to Barclays in 2012 to repay the Dutch government after its post-2008 bailout. 

ING is one of the first major banks to provide a platform in the UK enabling customers to manage money held by rival institutions. The app asks for permission to access a user's banking and credit card details across different institutions, data from which is then aggregated by a third party and fed into Yolt. It uses the information to remind users of the days remaining until their next payday, payments that have to be made in that time (for example, rent and utility bills), and the amount of money they can safely spend without going into overdraft.

Additionally, the app displays a user's spending across different categories such as clothing, eating out, and groceries, and helps them determine an optimal savings plan to meet specific targets. For now, the app is in a read-only format, meaning that users cannot conduct transactions through it. 

The Dutch bank is getting ahead of the game and preparing for open banking regulation to be introduced by 2018. Banks in the UK and EU will be required by law to allow third parties to access their clients' data, with customer permission, via API by 2018.

They will also be mandated to build APIs that enable third-party apps to initiate transactions on behalf of a customer, without the customer having to interact directly with the bank. Although Yolt currently relies on an external party to aggregate customer data, it has been built with this legislation in mind, and will be able to connect to other banks' APIs once they're launched.

Yolt could be a serious threat to the UK's major banks. That's because it has the potential to disintermediate other banks once the API regulation comes into force — customers using the app will no longer need to interact directly with their bank, and instead Yolt will own the entire customer relationship. That should worry other banks, which could see significant customer attrition as customer relationships, and loyalty, are eroded. 

Apps such as these demonstrate that we’ve entered the most profound era of change for financial services companies since the 1970s brought us index mutual funds, discount brokers and ATMs. No firm is immune from the coming disruption and every company must have a strategy to harness the powerful advantages of the new fintech revolution.

The battle already underway will create surprising winners and stunned losers among some of the most powerful names in the financial world: The most contentious conflicts (and partnerships) will be between startups that are completely reengineering decades-old practices, traditional power players who are furiously trying to adapt with their own innovations, and total disruption of established technology & processes:

• Traditional Retail Banks vs. Online-Only Banks: Traditional retail banks provide a valuable service, but online-only banks can offer many of the same services with higher rates and lower fees

• Traditional Lenders vs. Peer-to-Peer Marketplaces: P2P lending marketplaces are growing much faster than traditional lenders—only time will tell if the banks strategy of creating their own small loan networks will be successful

• Traditional Asset Managers vs. Robo-Advisors: Robo-advisors like Betterment offer lower fees, lower minimums and solid returns to investors, but the much larger traditional asset managers are creating their own robo-products while providing the kind of handholding that high net worth clients are willing to pay handsomely for.

As you can see, this very fluid environment is creating winners and losers before your eyes…and it’s also creating the potential for new cost savings or growth opportunities for both you and your company.

After months of researching and reporting this important trend, Evan Bakker, research analyst for BI Intelligence, Business Insider's premium research service, has put together an essential report on the fintech ecosystem that explains the new landscape, identifies the ripest areas for disruption, and highlights the some of the most exciting new companies. These new players have the potential to become the next Visa, Paypal or Charles Schwab because they have the potential to transform important areas of the financial services industry like:

• Retail banking

• Lending and Financing

• Payments and Transfers
• 
Wealth and Asset Management

• Markets and Exchanges

• Insurance

• Blockchain Transactions


If you work in any of these sectors, it’s important for you to understand how the fintech revolution will change your business and possibly even your career. And if you’re employed in any part of the digital economy, you’ll want to know how you can exploit these new technologies to make your employer more efficient, flexible and profitable.

Among the big picture insights you'll get from The Fintech Ecosystem Report: Measuring the effects of technology on the entire financial services industry:

• Why financial technology is so disruptive to financial services—it will soon change the nature of almost every financial activity, from banking to payments to wealth management.
• The basic conflict will be between old firms and new—startups are re-imagining financial services processes from top to bottom, while incumbent financial services firms are trying to keep up with new products of their own.
• Both sides face serious obstacles—traditional banks and financial services firms are investing heavily in innovation, but leveraging their investments is difficult with so much invested in legacy systems and profit centers.
• Meanwhile, startups are struggling to navigate a rapidly-changing regulatory landscape and must scale up quickly with limited resources.
• The blockchain is a wild card that could completely overhaul financial services. Both major banks and startups around the world are exploring the technology behind the blockchain, which stores and records Bitcoin transactions. This technology could lower the cost of many financial activities to near-zero and could wipe away many traditional banking activities completely.

This exclusive report also:

• Explains the main growth drivers of the exploding fintech ecosystem.
• Frames the challenges and opportunities faced by incumbents and startups.
• Breaks down global and regional fintech investments, including which regions are the most significant and which are poised for the highest growth.
• Reveals which two financial services are garnering the most investment, and are therefore likely to be transformed first and fastest by fintech
• Explains why blockchain technology is critically important to banks and startups, and assesses which players stand to gain the most from it.
• Explores the financial sectors facing disruption and breaks them down in terms of investments, vulnerabilities and growth opportunities.
• And much more.

The Fintech Ecosystem Report: Measuring the effects of technology on the entire financial services industry is how you get the full story on the fintech revolution.

To get your copy of this invaluable guide to the fintech revolution, choose one of these options:

1. Subscribe to an ALL-ACCESS Membership with BI Intelligence and gain immediate access to this report AND over 100 other expertly researched deep-dive reports, subscriptions to all of our daily newsletters, and much more. >> START A MEMBERSHIP
2. Purchase the report and download it immediately from our research store. >> BUY THE REPORT

The choice is yours. But however you decide to acquire this report, you’ve given yourself a powerful advantage in your understanding of the fast-moving world of financial technology.

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