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Is the blockchain used to track transactions on a particular A/R asset? I wonder how it is then associated with line of credit asset?

Ironically, FSOC may be a bigger threat to financial stability than marketplace lending or distributed ledger. It isn't the marketplace lenders that lost the appetite in the aftermath of 2008, it was the FIs driven by bodies such as FSOC. If you were a small business, good luck finding a loan. If marketplace lenders hadn't stepped in and rattled the cages we'd still be dealing with historically low lending rates to small businesses despite the flood of easy money. Speaking about unintended consequences, stopping the flow of innovation, and promotion of existing financial systems, is a much bigger risk than letting a few banks or marketplace lenders fail. As for blockchain, yes, it does create a nightmare for central regulatory authorities, but that is precisely the idea. They need to be disrupted like the rest of the industry.

I wonder if it is a temporary blip, or a significant shift. Would this lead to tightening of lending standards at these companies, and if so, would they still be competitive against the banks?

Sorry missed posting the link to US treasury site with costs of note production - https://www.federalreserve.gov/faqs/currency_12771.htm 

As someone who has a sense of the cost involved in setting up and maintaining this infrastructure, I respectfully disagree. There has to be a way that the actors are incentivized to build it, and keep it running. Running a real time API based instant settlement system is definitely more complex than a batch oriented one. And for most real life scenarios, it is a 'nice to have', not essential. When two parties want instant settlement, they should be ready to pay a premium or give up the rights on liability or both - just like for cash. And before you say cash is free - check this out that shows just the cost of printing cash is as high as 5% to 6% for low denomination bills and way higher for coins - all paid for by the taxpayers. I'd rather see a shift to digital currency (and yes, in some cases with instant payments), and have the banks given the freedom to charge a similar discount rate to make profits. But, the government is surely to get in the way. :)

The benefits of instant payments are quite obvious in the enhanced user experience, in digital transactions, enabling cash flow and the reduced credit risk among many others. Early movers will have the pricing advantage, and then the industry will settle down much as the mobile operators have. I find it quite interesting that the banks aren't being more aggressive and assertive in defining and executing on the business case.

You're correct. At least in the branches I visit, it's already happening. There's always a line for the tellers even though there are plenty of bankers in the branch sitting at their desks who are busy "selling", and a 'helpful' manager guiding people in the line to ATMs instead.

That's likely right. Imagine a banker coming to my place of business, and poring over the financials, and evaluating business health to suggest financial products, and provide financial advice! That would be awesome, but there are certain services that do require a physical store presence - safe deposit boxes, cash handling (beyond ATMs).

It is interesting to read this story along with the other one on Atom bank making a deal with a mainstreet lender to establish a physical presence. Both are examples of extreme strategies meeting the ground reality of multi-channel delivery needs. Many of the bank functions, such as self service A2A transfer, are much better served digitally, while others such as financial advice, getting a deep understanding of the target customer, or dealing with physical instruments is much more effective physically. The banks that master the balance will be the success stories of the future.

It is true that the actual extent of cash transactions is difficult to measure. However, it is possible to make reasonable approximations based on retail data, average cash value of items sold, etc. What is more important is consistent measurement and trends over time. In any case it is about time that cash went out of 'business'. US too has been trending away from cash quite a while.