Blockchain Future Series (5 part series — Part 4)
First, you may have noticed that almost every jurisdiction in the world takes strict measures to regulate the banking industry. This combined with the conservative nature of process in the banking sector has contributed to the sectors immunity to technological disruption.
However, in the recent years, Blockchain technology has spread very fast, and cryptocurrencies and ICOs have received vast popularity. There no doubt that the world is curious to see how this promising technology will influence or shape the future of banking.
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Perhaps you may ask: what will Blockchain do for banking? What is the space of Blockchain in banking, as the technology matures and gains more traction in the world of finance? If you have been asking yourself these questions, then this is your article. So, let dive in and explore:
The Panacea of Banking Problems
The many interesting characteristics of Blockchain technology make it not only very attractive but also cable of solving numerous issues currently facing banks and other financial institutions.
Blockchain enhances safety in data storage and transmutation, avails a decentralized and transparent network infrastructure and significantly reduces the costs involved in operations. These remarkable attributes make blockchain a very promising and in-demand solution even in an industry as restricted as the banking sector.
Nearly all financial and credit institutions require the intervention of third parties to help them carry out their day-to-day activities. The use of mediators makes the services of these financial institutions very expensive. Blockchain takes a decentralized approach and therefore eliminates third parties; consequently services will be available to clients at greatly reduced prices.
Popular use cases
Blockchain will disrupt most aspects of banking. Some of the transformations or use cases that you should expect to see include:
Payment
Banks and financial institutions can implement Blockchain technology, in general, to reduce costs and increase speed when making bank-to-bank and international transfers. Independent financial analysts and large financial companies agree that blockchain technology is very likely to replace the SWIFT bank transfer system in the near future.
Client identification system
Blockchain technology can also be applied in the banking industry to help in the creation of a decentralized client identification system. This is highly appropriate because all credit organizations need to perform KYC (Know Your Client) before processing any applications. With the use of blockchain, users will be identified on a single occasion, and the information will be stored in a secure location where all banks in the system can access it.
Loans and credits
There is a straightforward relationship between banking and financial services and insuring deposits and loans. The banking system has however been proven to be highly unreliable and vulnerable even in the most developed countries. State regulators use traditional currency to insure private bank deposits. A distributed system for loans and deposits that is based on ledger technology is not only decentralized but also immune to bankruptcy since one specific organization does not control the deposits.
Insurance
Traditional insurance can also be enhanced significantly by automating payment on insurance cases. Implementation of smart contracts that are performed automatically will eradicate the long bureaucratic delays that involve a large number of managers making it possible for people to receive payments instantly.
Banks that are actively testing and implementing the technology
Polish Bank Association
The Credit Data Processing Bureau, which works under the Polish Bank Association, records the credit histories of approximately one hundred and fifty million Europeans. Billon Group, a British fintech company, created a unique system based on blockchain for the bureau to process customer data.
The management of the bureau is confident that the blockchain solution satisfies the legal requirements, data protection regulation while simultaneously meeting the industries need, and increasing efficiency. Currently, there are eight major polish banks testing and implementing the product offered by Billon Group. The managers of these banks believe that blockchain will bring about a radical transformation in the storage of personal information and transfers between banks and clients.
According to a representative of the Billon Group Company, the company will continue to create and bring in blockchain-based solutions for data processing and storage and operations involving fiat currencies. The goal of the project is to give users the ability to control their personal data confidentially and securely.
Grupo Santander
Another banking group that has pioneered the implementation of Blockchain technology in the banking industry is Grupo Santander. The company is the largest banking group in Spain and is also one of the leaders in the UK. The company has rolled out a One Pay FX payment system that runs on Blockchain. The system aims at optimizing payments between South America and Europe by the use of distributed ledgers.
The Grupo Santander has launched a service that will accelerate international banking transactions and reduce the transaction fees involved. The service runs on ripple blockchain, which is popular for its cooperation with Western Union and American Express among other partners from the banking sector.
Santander is currently developing and testing a blockchain based solution for conducting shareholder voting that relates to the needs of major partners such as Broadbridge, Northern Trust, and JPMorgan Chase.
JPMorgan Chase
JPMorgan Chase is so enthusiastic about blockchains bright future that they have assigned a separate enterprise to study and implement this technology. The enterprise is known as the Quorum division. The bank has also put on test applications related to financial processes, and it has already issued a yearly deposit certificate where the floating rate is based on the distributed registry.
The Goldman Sachs bank
The Goldman Sachs bank actively studies and supports decentralized registry technology. The company has by now made investments in the Circle Cryptocurrency Project. According to a report made by Bloomberg, the bank is determined to become the leader in the use of cryptocurrency among its Wall Street competitors. It intends to achieve this goal by creating its own cryptocurrency that will deal with digital currency trading platforms exclusively.
Other groups of companies and banks associations
In addition to these large banks, other groups of companies and banks associations have been created to study and implement blockchain technology. The Canadian Bank of Montreal has become another member of the association together with a number of European banks such as the Swiss UBS, Spanish Caixa Bank, East European Erste Group, German Commerzbank among others. The association aims at developing a platform known as Batavia, which will finance trade in textile fibers and cars.
Cryptocurrency ATMs
The introduction of cryptocurrency ATMs will see a rise in the mass adoption and subsequent use of many cryptocurrencies. Currently, there are about 1400 cryptocurrency ATMs in the US. These 1400 ATMs account for more than half of the total number of cryptocurrency ATMs in the world.
Cryptocurrency ATMs are perfect for average people wishing to acquire cryptocurrencies in exchange for hard cash. The ATMs work very much like regular ATMs except for the fact that they deposit money into your wallet instead of a bank account.
What the future holds
Blockchain technology could have an enormous impact on the procedures for conducting and confirming transactions, optimizing assets, managing cash and a variety of other businesses processes which account for billions of dollars in expenses for banks every year.
Blockchain reduces accepted and established timeframes such as the amount of time it takes for funds to be received after a loan has been processed, the time required to send money from one bank to another or from one nation to another, the time needed to process and confirm personal information among others.
In the near future, the banking sector is likely will reap the benefits of a well-thought-out methodical and sustained approach to implementing blockchain in their processes. The technology will increase efficiency, speed, security, and lower costs in a majority of their operations. This will result in a significant improvement in the quality of their services to their end- users.
Blockchain Future Series (5 part series — Part 1): Blockchain Future — Atomic Swaps Could Be The Game Changer
Blockchain Future Series (5 part series — Part 2): Why Blockchain Is The Future Of Data Storage
Blockchain Future Series (5 part series — Part 3): Blockchain Disrupting Finance — Payments and Escrow
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