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In the combined on-chain/off-chain setup, the data that is registered on the blockchain (on-chain) facilitates aspects like non-repudiation, data integrity, distributed trust, etc. The data that is stored off-chain is verified against the data that is stored on the blockchain (such as hashes), before it is used. So, also in this hybrid case where the actual content is stored off-chain, the blockchain principles and advantages, such as decentralised trust, are still standing.

The combination of on-chain and off-chain data storage will do the trick for GDPR compliancy. Blockchain technology can be used to take care that non-repudiation and integrity of data can be guaranteed, while the data itself is stored off-chain. In this way you can apply any retention period that is required, including compliance to the right-to-be-forgotten rule of GDPR. After the data is removed from the off-chain storage, the only thing that is left on-chain is a document reference, document hash and digital signatures. It may also be that the off-chain data should still accessible for specific parties even if the customer indicated to-be-forgotten. For instance an account holder may require that its account statement data should not be accessible anymore, tax office laws can indicate that the account statement data still needs to be accessible for the tax office up to 10 years in the past. So, right-to-be-forgotten can imply that data must be forgotten for certain parties, but still be accessible for others.

Keith, points well made with respect to operation models and interoperability as critical success factors for blockchain networks. Another point that has strong impact on production uptake and success of blockchain networks is the impact and investments for of new blockchain network participants of integrating their existing business applications with blockchain networks. If participants need to type over data between their existing applications and the blockchain networks, an essential part of the business value (efficiency, reduction of errors and fraud, speed, ...) that blockchain brings to these participants is lost (or even completely eliminated). Therefore a seamless integration between a participant's existing applications and a blockchain network is in many cases an essential factor for participants to join blockchain networks. The lower this barrier of integration (investment, effort, changes to existing systems), the faster the adoption and success of blockchain networks will be. Plug-and-play solutions that simplify and accelerate this integration, play an essential role in realising the large scale adoption of blockchain networks.  

PayPal is offering their customers purchase protection, also when the actual settlement against the customer account does to take place via a credit card (but for instance a direct debit). It  is a choice of the TPP (paypal in this case) in  the way it positions and charges its payment services. The advantage of the existing card schemes is that the protection, including charge back rules, covers the complete chain, from card holder, issuer, acquirer till merchant.

Govenments can use blockchain technology to set up networks with payment accounts and fiat currency coins issued by the central bank. Third parties are given the opportunity to offer innovative payment and finance services on basis of the accounts in the blockchain network. Users can open accounts as well as buy/sell and transfer the coins via these 3rd parties. The settlement can take place via a bank account, but to service unbanked cash providers will allow users to buy/sell coins in cash via shops/kiosks. Users can be given access to their account (and transfer funds) via mobile phone (App or USSD/SMS). End-users are not exposed to the complexity of the blockchain technology. It is comparable with services offered by M-Pesa and others, with the key difference that it is open and not limited to one single service provider. This will result in more competition between service providers and drive innovation and put pressure on fees. The blockchain network can also be used by NGOs and government to settle medical care and other social services by issuing special purpose coins on the network. The purpose for which this coins can be used can be restricted by placing special conditions in smart contracts. In this way it can become also a valueable instrument to drive down corruption.

In this way blockchain is certainly a game changer to drive financial inclusion.

It is clear that anomynous digital currencies do not have the physical limitations of cash to be used for criminal activities and which is also an important reason for their popularity. Having said this, that does not mean that cash is 'innocent' with respect to enabling crimininal activities. There is one key advantage of cash. You can lit your fire with it if you need to hide in a cold shelter (for the ones who have seen Narcos).

Good article. One to add is the meaning of the payment initiation response that is sent by the bank back to the TPP (and indirectly the merchant). An 'OK' can mean, 'I've received the payment' till 'I guarantee that the money will be booked on the beneficiary's account'. For most commercial transaction, on-line as well as in-store, the latter is only what counts. If the payment can still be rejected because of insufficient funds, it may make merchants reluctant in accepting payments from that bank. The only thing that PSD2 states on this aspect is that the service level must be at least the same as the same service via the bank's own channels. But this can differ from payment type to payment type within one bank, not to mention the differences between banks. This means that TPPs (and merchant) may need to refuse accounts from specific banks because they do not guarantee the execution of the payment. Unless the merchant accepts the risk to hand over or ship goods without certainty on the receipt of the payment. I think this essential aspect has not received the appropriate attention in the PSD2 discussion.

@James I agree with you that players like WeChat become a serious threat of disintermediating the customer (business and retail) from the bank and leaving the bank offering APIs with which it is hard to differentiate (and make money). They run the risk becomming the airline behind Skyscanner.

The difference between Fintech and banks is not the technology that is used. It is the strategy that is followed. Fintech focus themselves on a very specific service and take care they excell in that. Succesful Fitechs also take care that they offer this service in as many countries as possible to reach as much economy of scale (cost efficiency) advantages as possible. Banks are doing everything (payments, cards, savings, loans, securities, asset management, etc.) to a many customer segments (retail, SME, corporates, private banking). Because of this lack of focus, they are not able to specialise and excell. You can't be the best in everything anymore. This makes it hard to compete with specialised Fintechs. At the same time the majority of banks are active in a relatively small market (only one country). This makes it impossible to reach the economy of scale advantages that Fintechs are able to reach. Customers shop around and pick the service provider that fits best for specific needs. If this implies that they need to make use of different service providers for different financial services, this is not considered an issue. The customer that makes use of one bank for all its financial services becomes rare. Banks need to change their strategy and start focussing and specialising to be able to compete with Fintechs.

@Bradley I agree with you on the user experience. I guess it's a matter of time that also biometric authentication will be supported to access the App (as the PIN is used to access the App, not the website). As long as not all phones support biometric authentication, a PIN is always needed. But five years from now PINs will be a rare phenomena for mobile phones authentication.

I agree with your old friend Ian. The extent to which a new technology is accepted and adopted drives the success of it, not whether it is the best or not.