(pictured: Peter Brook and Paul Brody)
By Trevor Dixon*
Pillar Administration may be in the throes of being sold by the NSW Government, but that hasn’t stopped it from seeking to take advantage of what EY has described as the single-biggest technological breakthrough in transaction processing in 50 years.
Eschewing the consultants’ more politically correct term “distributed ledger”, Pillar and its advisor, EY, have stuck with the common name for the new technology – “blockchain” – notwithstanding the link of that name to the failing cyber currency Bitcoin.
Speaking during a break from the inaugural Pillar Super Summit in Wollongong last Thursday, Peter Brook, the Pillar managing director and chief executive, said that using the blockchain technology could help reduce points of friction in the superannuation industry and thus reduce opportunities for various agents to “clip the ticket”.
Working with EY, Pillar has identified some 20-or-so cases for blockchain to be used in the superannuation sector. Of the 20, Paul Brody (EY’s technology sector strategy lead) highlighted three:
- A single superannuation account for life
- Permissioned sharing of member data, and
- Trusted data management.
Pillar and EY recognised the fact that, despite the current level of hype, the technology was a way to go before being mature and robust enough for broad-based application. In fact, they hinted that that day was perhaps two-three years away.
As an administrator, Pillar is often cited as a prime target to be negatively disrupted. Despite (or maybe because of) that, Pillar sees this current period of the maturing of the technology as the ideal time to explore ways to apply it. Brook said Pillar intended to have a prototype application in place by the end of 2016 – possibly limited to an internal audience to start. He believes the firm is in a good position to be an industry leader in the field.
Brook said: “Transformation is now inherent to our industry and [Pillar needs] to be prepared to better understand what blockchain can deliver to secure a leadership role for the future. We have identified a range of core capabilities that ensure Pillar will be well positioned to take affirmative action as blockchain technology builds momentum. We see this as a way to secure a role in the future.”
Co-incidentally, also last week SWIFT, the global banking consortium and another group seen as ripe for disruption, released an analysis of the level of maturity of distributed ledger (blockchain) technology and pointed to a number of areas that needed to be developed before the technology would be ready for universal adoption. In particular, SWIFT pointed to the need for the standardisation, governance and scalability (read “transaction speed”) as key areas for development.
Brody saw current industry developments in broadly two camps. He sees initiatives such as Ethereum and the Linux Foundation as developing the open source foundations for the technology and its broad-based and ubiquitous application. Then, players such as Digital Asset Holdings (of which ASX is a shareholder) and R3, Brody sees as developing applications on that standardised technology.
The ASX’s commissioning of Digital Asset Holdings to investigate the use of distributed ledger technology to replace the CHESS system is, indeed, being closely watched by the Australian regulators as well as the global securities trading community as a potential indicator of whether the technology can be successfully applied.
In line with a push to reduce friction in the system, Brook pointed to the benefits of a member-centric approach and to the increasing push for members’ data to be more readily available – and in a usable form. Initiatives such as the European Union’s Payment Services Directive 2 and the UK Treasury’s support for Open Banking APIs are, in Brook’s view, sure to be followed in Australia. Pillar is positioning itself to be at the forefront of development in that area – starting with the potential to use blockchain technology.
Interestingly, these comments and the potential application of the blockchain technology pick up some of the themes we raised at the My Platform Rules Conference in February this year. With member data being more freely available and processing friction decreasing, we asked what changes will be wrought in the wealth management eco-system? This is particularly pertinent for the delivery of quality services to fund members in the digital age. And we asked who will take best advantage?
The Australian system and infrastructure changes being implemented – such as SuperStream, the $1 billion-plus total banks’ investment in the New Payments Platform – together with the visible government and regulator support for innovation and fintech development should add to this push.
Peter Brook believes that, unlike some others in the superannuation space, Pillar is looking at the second and third order consequences of the changes and will be helped by advancing its blockchain prototype work, believing that Pillar will be well positioned when that technology has progressed past the hype cycle and is ready for broad-based application.
* Trevor Dixon is a former banking executive, fund manager and general council for BPAY who now works with financial services clients to apply technology advances to deliver digital customer outcomes. He joined the governance team working for the Digital Business Council, which is looking to introduce industry-wide standards to support Australia’s e-commerce environment.