Banco Santander’s New Blockchain Technology App Could Change Banking Industry Dynamics

Spanish bank Santander has introduced its One Pay FX international payment app, the first of its kind to be released by a major financial institution, offering the use of blockchain to facilitate international transfers for retail banking clients

With the launch of its new app, One Pay FX, Spain’s Banco Santander is now the first international bank to utilise blockchain technology for online payment transfers. Until now, smaller fintech firms have dominated this new sphere, providing cheaper and faster alternatives than those offered by incumbent banks. This move represents a significant challenge not only to smaller fintech start-ups but also to the business models of traditional financial institutions.

From Local Bank to Global Financial Institution

Founded in 1857, Santander has since expanded beyond its home market into 10 other countries across North America, South America and Europe.  In total, the bank consists of more than 14,000 branches and 100 million customers. Santander’s introduction of new, cutting-edge technology therefore has the potential to influence the banking sector globally.

Based on market capitalisation, Banco Santander is the Eurozone’s largest bank. Since the Spanish financial crisis, the bank has thrived. Just last year, it posted €6.6 billion in profits, a nearly 7% increase from 2016. This stable financial foundation, in addition to millions of pre-existing customers, gives Santander a comparative advantage over other fintech start-ups.

A key part of Santander’s growth strategy is the recognition of the role that disruptive technology will play in the banking sector. Its venture capital arm, Innoventure, has invested in 20 different fintech firms which are developing products related to artificial intelligence, online payment services, and mortgages. In fact, the One Pay FX app is the result of its 2015 investment in Ripple, a Californian fintech start-up.

The Buzz Behind Blockchain

Blockchain technology has become a buzz word most often associated with the world of cryptocurrency. However, it’s important to understand that blockchain is a technology that exists separately from the somewhat volatile world of cryptocurrency.

In essence, blockchain, also known as distributed ledger technology, stores information as blocks in a chronological, indelible manner. Its decentralised and digitised storage system improves the efficiency and security of a variety of different operations. While cryptocurrencies have relied on blockchain technology, it can also be harnessed for the execution of smart contracts, identification verification, and trade finance.

While blockchain has several other uses besides the management of cryptocurrencies, the presence of digital currencies in Europe is growing along side the implementation of blockchain technology. Cambridge University released a study in 2017 on the global cryptocurrency market, which found that Europe is the region with most cryptocurrency exchange platforms in the world. Copyright: Wit Olszewski/

One Pay FX utilises Ripple’s blockchain-based technology called xCurrent. This technology will enable clients to send money to any of the 19 Eurozone countries and make US dollar payments to the USA.  While only customers based in the UK, Spain, Brazil and Poland are currently able to use this new app, Santander expects to introduce the app in other countries over the next couple of months.

Normally, it can take up to 5 days for such transfers to be completed. However, blockchain technology will speed up this process with the majority of transactions occurring within 24 hours. It will also allow clients to see the exact amount that will be received before the transfer is processed.

How Southern Europe is Embracing Blockchain Technology

On an industry level, Banco Santander’s adoption of blockchain technology is an example of an evolving business model. Traditionally, the bank initiating an international transfer, as well as any intermediary banks involved, would charge a fee to process transfers. One Pay FX will reduce these costs for clients and even eradicate commission fees for UK customers. This demonstrates a significant acknowledgement on the part of an established bank, to recognise the necessity for market adaptation in order to stay competitive with emerging fintech firms. Going forward, it’s expected that other Southern European banks will start to offer similar services.

More broadly, Southern Europe has shown signs that it is ready and willing to embrace the disruptive influence of blockchain technology. For example, last December France became the first country to adopt a legal framework for the regulation of the use of blockchain technology in the trading of unlisted securities. In March, Malta completed the public consultation period on its proposed framework for the certification of distributed ledger technology platforms. Analysts anticipate that Malta will enact some of the most progressive regulation of blockchain technology in an effort to attract financially innovative firms.

The winds of change are blowing strong from Southern Europe. The region’s governments and companies have demonstrated that they are eager to adopt new technology that will transform their economies. While Santander is just one bank, its stature and influence in the region makes its foray into blockchain technology a model for other financial firms throughout Europe and the world.

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Katrina Pirner

Katrina is a Berlin-based freelance writer who focuses on economics, disruptive technology and politics. She’s previously worked in Canada, Italy, Belgium, and the US. Katrina holds a MA in International Relations from Johns Hopkins University where she concentrated in European political economy.

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