Raiffeisen Bank International was uniquely positioned in Central and Eastern Europe to develop a private stablecoin that operates alongside the Euro. Head of Strategic Partnerships and Ecosystems, Christian Wolf, says the bank’s tokenisation platform shows what collaboration and transparency can achieve.
A payments system that’s super-fast, super-secure and super-efficient, with the ability to include transactional data, sounds like Utopia. Blockchain tokenisation can offer just that and it is fast taking hold among the most innovative players in global financial circles.
The latest to join that still somewhat exclusive club is Austria’s biggest bank, Raiffeisen Bank International (RBI), which is also a leading force in Central and Eastern Europe (CEE). Its RBI Coin, revealed in May, is an alternative national currency, fixed against the Euro, which has been developed in partnership with UK/Polish fintech Billon.
Stefan Andjelic, RBI’s Blockchain Hub lead, says the bank was inspired to make the move by two things. Firstly, US bank JPMorgan’s development of the JPM Coin, which has been offered to institutional clients for blockchain payments since early 2019. And, secondly, a forecast by the World Economic Forum that 10 per cent of global gross domestic product is expected to be digitised through tokenisation by 2027.
Andjelic says blockchain tokenisation carries with it three distinct advantages over legacy payment systems – namely, near-real time settlement, a single source of truth that is permanent and verifiable, and the ability to constantly evolve through disruptive technologies. To that end, RBI, which has 16.7 million customers, has big ambitions for its stablecoin, which uses Billon’s Digitised Distributed Cash system, making it a valid alternative to central bank-backed tokens.
Its initial goal, Andjelic says, is the development of a unified RBI tokenisation system, which is starting in its home territories of Austria and Central and Eastern Europe (CEE). Its greater vision, however, is to have coins backed by other currencies, as it aspires to become the most innovative bank in the region. Christian Wolf, RBI’s head of strategic partnerships and ecosystems, believes that hugely contrasting market conditions in the CEE make the region ripe for adopting such a payments system.
“CEE in general is very fragmented, but this holds true even more for payments,” he says. “We have some markets that are super-advanced, even compared to Western European markets – the Czech Republic, Russia and Croatia, for example – but, on the other side, we still have many markets that are quite cash heavy and not using digital solutions to the same extent.”
The absence of a crossborder faster payments system such as the Single European Payments Area Instant Credit Transfer (SEPA Inst) – which has not yet been fully adopted by some central EU member states and is not, in any case, available to their near-neighbours outside of Europe – was another factor driving a tokenised system.
“You need to keep in mind that most CEE countries are not within the SEPA system. This is the reason for the emergence of a lot of national initiatives, for instance, in Hungary, Serbia, Poland and Russia,” says Wolf.
Innovation is shot through RBI’s DNA: it has an award-winning Elevator Lab that actively seeks out ideas from fintechs, including many from the Russia Federation, as well as a Blockchain Hub. The RBI Coin was a result of testing between the bank and Billon in the Elevator Lab, proving Wolf’s point that cooperation and collaboration with outside partners is fundamental.
“We have found that there is potential in cross-industry, co-innovation approaches, with fintech being one special part of that,” he says. “But we want to extend the offer of cooperation and collaboration to other parties as well. We have several approaches – for instance, in the area of purely digital cooperation concepts, very much based on the foundation of open banking. But we are also looking into emerging technologies that leverage the power of ecosystems.”
Projects chosen for the Elevator Lab receive funding for an intensive, four-month programme, with the most promising pilots tested in a real-life banking environment. Invitations for forthcoming projects will focus on developments in digital payments and banking-as-a-platform, which will look at super apps, marketplaces for banking and non-banking services and plug/play infrastructure for core banking.
The latter is an area where Wolf sees much potential, with artificial intelligence (AI) key to evolving the role RBI plays in its customers’ lives, particularly over payments. Explaining his vision, Wolf says: “We can use AI to analyse the payments habits of our customers and then, based on the information we gather there, propose better offerings.
“For instance, if we find customers are using their cards when travelling abroad and they pay a lot of fees, we can offer cheaper cards. When we see that they incur a lot of costs for recurring payments, we could change that. In general, this would help us to better feed into the customer journey, and also provide some added value that is based on insights we didn’t have before.
“I believe using these technologies can help us, firstly in better understanding the client and, secondly, in better shaping our offer to those clients. I personally believe that these offers can and will also go beyond what we currently consider to be our core business.”
That, Wolf says, will involve leveraging customer touchpoints so that banks will not just simply provide a payment, for example, but will also deliver other services alongside it.
“It could be that we, as a bank, screen your subscriptions and your energy bills, and give you recommendations if you want to change your provider. We help you better understand your mobility needs and propose something that might be better for you. We help you not just at the specific point of buying a house, but in the whole house-buying journey, from identifying the need to then helping you to select the best option, be it an apartment or a house, at whatever location. Then, of course, we finance it, but also maybe help you find the right contractor, the right painter, the right people to help you to remodel it.
“I really like that last example because, actually, it connects two different kinds of customer of the bank. It links them. On the one hand, we have our corporate customers – and that’s not always big corporations, but also SMEs operating locally. They make a living out of these connections, and I think this can be beneficial for everybody. You bring together the consumer and the producer and you, as an intermediary, help them on both sides, across the platform.”
To make this achievable, though, requires a change of mindset in some markets.
“Open banking, in the UK, is often considered as simply compliance with the revised Payment Services Directive (PSD2) regulation, but we take it to mean everything, based on application programming interfaces (APIs), that allows for new cooperation and collaboration,” he says. “So, it’s more about interconnectivity and interconnectivity also means openness.
“You are not in the position anymore that you only consume data or services from the outside world to your liking, but you also need to offer data and services to the outside world – this is the value of an ecosystem. And, once you overcome your maybe internal mental barrier that it’s not good to share what you are doing, then this can offer up a lot of opportunities, based on the network effect.”
Wolf also believes that fintech entrepreneurs in CEE have much to offer, based on the applications within RBI’s Elevator Lab, mostly around open banking and analytics.
“I believe that this high number of fintechs in open banking may relate to the fact that CEE countries are known for a very young but also technophile population,” he says.
Looking more broadly at financial services of the future, Wolf believes that further decentralisation of financial ecosystems, such as through blockchain solutions, will help democratise investment opportunities like never before. It is an area being actively studied by RBI. “I do not say that decentralised finance must exclusively be built on blockchain solutions. It can, of course, be other solutions but, for the moment, blockchain looks very promising,” he says.
“For instance, when we look at what’s happening in cryptoassets (and I deliberately do not just mention cryptocurrencies as I’m talking here also about tokenised equity, debt, etc) and what’s needed to make this tradable – blockchain allows peer-to-peer transfer of assets and near, or even real-time, settlement of those assets.
“The concept of tokenisation, I firmly believe, also leads to a democratisation of investment, because you can buy fractions of shares or of whatever asset you want – even a piece of art – that wouldn’t have been accessible to you before.”
The CEE region’s predisposition to new ideas and the local industry’s willingness to collaborate bodes well for RBI’s tokenisation platform. We’ll let the Blockchain Hub’s Andjelic have the last word. “An RBI ecosystem is the way to go,” he says, “with a common goal of making payments faster and more efficient, as well as creating new business models.”