HSBC Goes All-In

HSBC Goes All-In

Today, I want you to imagine your daily commute as a brisk 10-minute walk.

Just down the road is a fresh food market too.

The air is clean and clear.

There’s just one snag: You have to walk by streets coated with horse manure.

This was the reality of anyone living in the 19th century.

Some 20 million foals trundled up and down the streets of North America and Europe alone.

A gallon of urine and 50 pounds of manure — a single stallion could produce that in a day’s work.

The stench must have been unbearable. To say nothing of diseases spread by flies bred in horse dung.

Thankfully, it’s not something you have to deal with today.

Here’s why:

The family car revolutionised our daily commute and grocery run. And it’s made cities much larger than one with a transport system built on horses ever could.

But not every outcome has been positive.

Cars eliminated methane emissions in cities, but they introduced ozone-ripping carbon monoxide. And car accidents replaced injuries from bucking and kicking horses.

But it does show that disruption rarely unfolds without complication.

No matter where it happens, or on what scale, change always produces winners and losers.

Often times, it is both necessary and welcome.

But it’s rarely inevitable.

In hindsight, it’s easy to assume the transition from horses to cars took place overnight and that it was met with broad approval. But that couldn’t be further from the truth.

In fact, this process played out over the course of half a century, introducing as many problems at it solved.

After all, nothing takes place in a vacuum. It’s impossible to upend industries without destroying the livelihood of both people and businesses.

Road sweepers, carriage drivers and breeders suddenly found themselves out of work as the horse was displaced.

But it also paved the way for the biggest explosion of urban development in human history.

Now, some 120 years following the four-wheeled takeover, we find ourselves at another inflection point.

This fight promises to be fiercer than any before it. But, unlike the automobile, it’s unlikely this challenger will need 50 years to displace its competitor.

In fact, just this week, it landed the first blow.

Going mainstream

A landmark event took place this week that could overhaul the financial industry as we know it.

Banking giant HSBC completed the world’s first commercially viable trade-finance transaction using blockchain.

It’s proving that blockchain technology is ready for wider adoption in the $9 trillion trade-finance industry.

More than anything, it could be the first step in making banks obsolete, resulting in faster and more efficient trading transactions.

As it stands now, these are cumbersome. They require stacks of paperwork and can take several days or more to process.

But HSBC has shown that transactions can not only be paperless, but completed in just hours.

In fact, HSBC likens it to how standardised shipping containers became the benchmark of the seas because it made moving goods so much easier and faster.

According to experts, blockchain technology reduces costs and settlement periods, speeds up transactions, removes inefficiencies, all the while beefing up transparency.

HSBC claims blockchain tech will be used primarily as a utility to aid the trade-finance industry.

Yet there’s a funny thing about disruption: You don’t know where it’s going to lead.

In the short-term, blockchain should help banks benefit from higher profit margins as efficiency increases.

But banks could be signing their death warrant by embracing this technology.

Regardless, HSBC expects the adoption of blockchain platforms and standards by banks, ports and traders to expand over the next five years.

This signals an all-important role for blockchain in the future of global finance.


Jim Rickards Signature

Mat Spasic,
For The Daily Reckoning Australia