Blockchain Disruption In Banking Sector

Blockchain technology, which is less commonly known as Distributed Ledger Technology, is the base technological foundation which has the ability to create the shared digital databases of entries that are unchangeable.

Today, most of the processes of the Banks are slow, time-consuming and expensive. As an alternative, Blockchain technology can be used to overcome all these challenges. This is what is believed by proponents of this technology, and for all the good reasons.

Most of the major banks (for instance UBS, Credit Suisse, and Banco Santander ) around the world are testing this technology. Many banks have invested in this in one or the other way. Some are developing their own in-house blockchain systems, and others are partnering with Fintech companies to achieve their goals.

But before proceeding ahead to read what Banks are doing, we need understand why they want to do what they are doing.

There are many reasons why Banks are exploring this technology, and primary reasons for doing this is Cost Savings and efficiency.

Most of the banks are dealing with the rising costs of maintaining or replacing their aging infrastructure and ensuring compliance with heavy regulatory burdens. Research has shown that if this technology is applied, banks can save up-to $20 billion per year. That’s a big boost.

Lots of Fintechs are providing services based on Blockchain at reduced cost with greater speeds. As a result, banks have started to construct their own blockchain-based solutions to compete with these new comers of Fintech industry.
If you aren’t aware of the fact that from a recent study whose results were published by Accenture, which says that about 9 in 10 executives said their banks are exploring the use of Blockchain. So the buzz is real and attention-grabbing. Most of the banks are in the early stages of adoption, with about 3/4th of their attention to Proof of Concept, formulating their own blockchains or just beginning to look into it.

Important Ingredient: Network

Whenever we talk about adoption of Blockchain by Banks to help transform the payments system scaling along with the reduction in risk of failure,i.e., being more efficient, Network is very important. It must have :

Necessary rights, standards, obligations, and controls.
Quick and efficient onboarding process just like a “plug and play” system that speeds up the process and open the doors of the corridor for future improvement.

However, Bank executives around the world agree to the point that Network should be open to Banks and Non-Banks organization, to create an open level playground for all. It shouldn’t be an exclusive club.

Another factor that Banks are concerned while adoption of Blockchain is the security. Banks are exploring it in their own ways.

Blockchain and distributed ledgers have a bright future. Being open source along with being trusted and secure system, they can help banks not only reduce the cost of processing payments but also create new products and services that can generate important new revenue streams.

To summarize, key considerations for banks exploring blockchain include:
Identifying opportunities for innovation.
Testing proofs of concept.
Understanding the regulatory and data security implications.
Dissecting the blockchain implementation: open vs. permission. Planning for transaction scalability.
Forming partnerships and cross-functional and cross-industry collaboration.

Use Cases:

Let’s talk about the Use Cases from Financial and Non-Financial Domain. It’s important to get the idea across all domains.

Some Use cases in Non-Financial Domain:

Reviews/Endorsement (Asimov, The World Table)
Digital Content /Documents, Storage, and Delivery (Block Parti - New media digital distribution platform)
Blockchain in IoT (Filament [https://filament.com/], ePlug, Chimera)
Smart Contracts (Security - Symbiont)

Some Use cases in Financial Domain:

Currency Exchange and Remittance (Coinbase, Ripple)
Data Storage (Storj, PeerNova)
Trading Platforms (BitShares)
Gaming (PlayCoin,Deckbound)
Ride Sharing (La’zooz-[http://lazooz.org/])

These are just few use cases. This gives us the idea that Blockchain is not just any other technology. It’s THE TECHNOLOGY of the present and the Future. The banking sector is the one that can take the most advantage of it. Banking Sector has full rights to explore and innovate!