Banks are adopting the Blockchain technology to improve both internal and external operations, eliminate middlemen, improve security, and save costs.
Since the invention of Blockchain, the FinTech environment has been under constant evolution. Despite criticisms of Bitcoin which is the most widely known application of Blockchain, the amount of interest shown in the technology has become enormous. Several banks and financial institutions have shown a lot of interest in blockchains.
What exactly can these financial bodies achieve using the blockchain?
Blockchain can be a backbone
David Prince, Blockchain consultant, says;
“The Blockchain can perform many standard financial functions as it already does so well with Bitcoin. Banks are simply adapting these features with custom software to perform the same outcomes with fiat currencies. Basically the Blockchain becomes the backbone of a software program much the same as DOS with Windows.”
Blockchain eliminates trust issues
Christopher Franko, Blockchain researcher at Ribbit.me, responds by saying:
“Blockchain technology allows banks to truly work together for the first time in history. Traditionally banks have always had a tough time with working together because banks in general have a hard time trusting other banks (kind of ironic if you ask me since they demand trust from customers). Blockchains are implicitly trustless due to the immutable nature of a blockchains records. The reason is, the special identifier of future blocks is dependent on past blocks, so if any data from the past is tampered with it alters all the identifiers of every block thereafter so it then becomes trivial to know if someone isn’t telling the truth. But that is just the obvious application, and about self fulfilling contracts, with smart contracts we can upgrade all sorts of legacy systems.”
Blockchain enhances speed and connectivity
The legal representative of the Serbian Bitcoin Association, Nikola Cvijovic puts it this way:
“At first banks can use the blockchain technology in some kind of private blockchain to improve internal processes, make them faster and more secure. Second stage could be building better connection between banks across the world utilizing blockchain technology, circumventing clearing houses and other middlemen, gaining security and speed in transactions and at the same time lowering cost.
Nevertheless, at this stage it is hard to tell how the blockchain can affect the banking system because this technology is still new and developing very fast. At first glance, banking systems could benefit from blockchain technology in terms of liquidity, speed, cost effectiveness and security.”
Jason Cassidy, chief communications officer at Emercoin, says:
“There is a tremendous new world of innovation that awaits the financial industry by the adoption of blockchain technologies. This is perhaps the ripest of all industries to see positive disruption given the lack of technological innovation in the banking industry over the last fifty years. An example is SWIFT, which has been around since 1973 and has seen very little improvements over that time. Trade settlements, time stamping of completed trades, internal security, securities clearing, asset ownership, proof of ownership for mortgages and loans and digital receipts are all areas that will see vast improvements from blockchain integration
In 2016, the question is less "What can blockchain do for the banking industry?" and more "What is the best way to accomplish this?", this introduces new questions such as private versus public blockchain, permissioned or permissionless, etc.”