WEX's blockchain philosophy: Innovation first, products second

The fleet card provider WEX isn't sure how blockchain can help its business, but it's confident enough in the technology's promise to move forward.

That makes WEX one of the growing number of financial services providers to invest in use cases for blockchain, the distributed ledger technology commonly known for enabling bitcoin transactions. Banks and other companies have started using it to streamline product delivery and back office processes.

"It's in very early stage," said Nicola Morris, senior vice president of corporate development for WEX. "We're seeing investments and proof of concepts and projects that many companies are working on."

Morris and WEX are excited enough about blockchain that they are launching a developer event to product proof of concept for potential products. The event, which WEX describes as a competition, will last about a month and will likely be followed by similar events in the near future.

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There's not a lot of detail beyond that, but Morris has already seen how blockchain can wring inefficiencies out of financial processes such as trading, and is willing to build cases now for an eventual payoff in the future.

Blockchain "will enable a new way of doing business and create more efficiencies and security benefits, and the only way we can really understand that better is to start testing it," Morris said.

One of WEX's goals is to get staff working on ideas for how blockchain can serve WEX's business. The company offers payment cards for shipping companies, among other services. The staff will study those business lines, spot areas where a distributed ledger could improve processes or create new processes, and determine how or if blockchain can be helpful. More followup development and testing will follow.

"We want to bring out ideas and get our staff engaged," Morris said. "The second thing for us is to get much better institutional knowledge and a deeper understanding of blockchain."

WEX is in the midst of a global expansion that dates back three years and involves expanding to new continents and handling currency conversions, as well as booking, reconciliation and international payments. The company is extending its product line, partnering with Fifth Third on an employee benefits card. WEX has also added to its core business, signing new card payment deals with Chevron and Exxon.

There are some parts of WEX's business that are similar enough to other business categories where blockchain is finding a role. While WEX's development contest is open-ended in terms of uses, there are some functions that it hopes to improve with the new technology.

Cross-border payments, which addresses different jurisdictions, currencies, regulations and correspondent banks, is one area WEX will examine closely given the company's expansion, Morris said. Some companies are using distributed ledgers to reduce the cost and time of processing international payments, creating a possible use case for WEX.

"Nobody is really doing blockchain payments right now at scale or even in production at this point, but there are a lot of use cases around cross-border payments," Morris said. "We're also looking at the travel sector and onboarding."

WEX's developer hub signals it views an opportunity to extend its business-to-business payments expertise to the travel industry, said Michael Moeser, director of the payments practice at Javelin Strategy & Research, adding blockchain sandboxes more commonly include multiple companies to manage the overhead for development.

"Business-related travel and commercial travel are multi-billion dollar industries WEX has worked in, often leveraging closed and open network payments, along with other payment forms," Moeser said. "With a blockchain solution, it will be seeking to drive down costs for all participants while providing better data quality and security in the transactions."