Instead of each bank, and every major corporate, functioning as an island with their own systems, processes and reconciliation protocols, they would use shared platforms based on so-called distributed ledgers.
Entities involved in transactions would use their validated digital identities to approve transactions, providing a permanent tamper-proof record of the agreement.
This would be a horizontal platform, where the data is not owned by any one organisation or entity, with the flexibility to rapidly deploy vertical solutions as today new apps are added to the App Store.
There might be one vertical for cross border payments, another for loans, and another if a business wants to issue a corporate bond.
Information could be readily shared with other entities, such as regulators, as and when it was needed.
So while the platform would function for everyone, information and data would still remain private between transacting parties.
“Realising this vision will require the right level of acceptance and collaboration,” said Giulio Katis, head of financial markets eCommerce at Westpac Institutional Bank.
“For Westpac, this is all about driving purposeful innovation. It starts by pulling in the right people across our business, the industry and our customers, to get innovation powered by real needs, designed to get real results.
“Initially distributed ledgers will provide an alternative infrastructure, sitting alongside the way wholesale cash is currently managed for example, and the focus will be on smaller pieces where the cost benefit analysis says there is a faster pay-off.
“There won’t be a big bang. There will be pockets of infrastructure which will be done first and as soon as there are some major wins it will gather significant momentum.”
Mr Katis and his team are responsible for creating a digitally enabled and data-driven financial markets business, transforming the way Westpac's financial markets division operates and services customers’ needs for foreign exchange.
Part of his role is to lead Westpac’s participation in R3, a consortium of around 70 of the world’s financial services companies, more than 40 of them banks, which is piloting and testing the potential of the distributed ledger, or blockchain-inspired technology.
After a series of “proof of concept” trials this year, R3 members will make a decision in 2017 on continuing to fund the consortium in its Series A first round capital raising.
Westpac is also involved with distributed ledger start-up Ripple, which is building out a network to facilitate faster and cheaper cross border payments, a block chain alternative to the current system through global settlement engine SWIFT.
“There are huge efficiency gains for the banks, and for the whole financial system, if blockchain-inspired technologies can deliver on the visions of companies such as R3,” said Mr Katis.
“We operate in a world where every bank has its own internal systems and processes and they are extremely expensive to maintain, and we are dealing with so much legacy and multiple registries.”
In a world of exploding data, each bank needs to invest more resources into data management, but with block chain common platforms could guarantee standardised views of data.
Realising this vision might be five or ten plus years away, but Giulio Katis says that for Westpac “to be a follower is not an option” and that in the next two to three years we will learn a lot more about what blockchain-inspired technologies can practically deliver.
Investing in blockchain and other emerging technologies, and becoming involved in proof of concept trials, is a way to provide service leadership for customers as partners in change, he said.
“For distributed ledgers to become a part of mainstream banking, the evolution will involve two parts,” said Mr Katis.
“There are the interbank activities which keep banks going and functioning, and then there is the direct contact between banks and their customers.
“For R3 the focus is on replumbing and digitising interbank connectivity, and as that progresses and proves itself it will create opportunities to deliver new solutions for customers at all levels.