CBA and Data61 join forces to create ‘smart money’
Commonwealth Bank's Sophie Gilder and Data61's Mark Staples have teamed up to create  programmable money by using smart ...
Commonwealth Bank’s Sophie Gilder and Data61’s Mark Staples have teamed up to create  programmable money by using smart contracts on a private blockchain.

The Commonwealth Bank and CSIRO’s Data61 have joined forces to create “smart money” using blockchain technology, which has the potential to reduce fraud and revolutionise government programs such as the National Disability Insurance Scheme.

In an initial proof-of-concept called Making Money Smart, the organisations have created programmable money by using smart contracts on a private blockchain, allowing conditions to be applied to the way the money is spent.

CBA’s head of experimentation and blockchain, Sophie Gilder, told The Australian Financial Review the NDIS was a logical scheme to apply smart money to because of the number of rules, the scale and the lack of transparency and manual reconciliation that takes place regarding how money is spent.

“We knew this would be a tough case, but that’s why we wanted to tackle it,” she said.

“It’s a big, hairy issue and we envisage using blockchain and connecting it with the new payments platform because that infrastructure is there and allows payments to be made in seconds.

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“[But] when we do proof-of-concepts we don’t like to use real data or real money … we always do these tests in a sandbox environment where we can glean learnings before applying it to real circumstances.”

Making Money Smart is the latest of 20 experiments the bank is now conducting using blockchain technology.

Of the 20, a few have progressed to the early stages of commercialisation, including its capital markets issuance platform, which was used to issue the world’s first bond that was created, allocated, transferred and managed with blockchain technology for the World Bank. In August it was announced that the two-year bond had raised $110 million.

It is also edging closer to commercialising a trade and supply chain finance blockchain solution, having done several proof-of-concepts.

Plenty of potential

Ms Gilder said it would likely be years before smart money could be rolled out commercially in a scenario such as the NDIS because of the complexity of the scheme, but she said she was optimistic about nearer term potential in industries like insurance.

“You could use smart money for insurance payouts or corporate credit cards. In these instances there are less rules, although still some rules, meaning it will be faster to implement. But that doesn’t mean we’ll stop working on the NDIS,” she said.

“We’ve had really great feedback and we want to see if we can make it a reality. But with so many stakeholders and the amount of money flowing through it with half a million participants, it will take longer.”

In a real-life scenario, the blockchain technology underpinning the system would be invisible to the user, according to Data61’s software and computational systems senior principal researcher Dr Mark Staples, who said for users it would just be like using an app for their expenses.

Ms Gilder said there would be near, mid and long-term benefits of blockchain, with the most meaningful innovations most likely to be developed in the next five to seven years.

“Near-term the benefits are based on a cost-out thesis … around the hard costs saved and the number of hours saved [from a project or task],” she said.

“Then in in the medium-term it has significant potential in terms of risk mitigation … longer term is where the exciting opportunity comes in around products you can’t even imagine today, using not just one piece of technology but an amalgamation.”

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