Banking Immediately Needs Blockchain, We Find Out Why!

Blockchain technology is the inseparable platform that has enabled the advent of crypto trading and value transfer and is successfully applied in a host of other fintech areas.

Commentators note that blockchain technology has a decidedly disruptive potential in global finance. Big banks in America, Canada, Europe and The East have been developing and patenting blockchain apps for a while now, as the benefits of the construct can result in major savings and better customer UX for banks.

Banks Need To Co-Opt Blockchain Tech

As a decentralized, public ledger with watertight encryption, blockchain technology has massive application in securely transacting with a currency, trading, property transactions and many other asset movements. As the most accurate accounting ledger in matters of secure liaison, blockchain has thousands of subtle and outright improvements to offer a distrustful public and the business and banking sectors.

Banks currently navigate between the awareness of the technology’s potential to eliminate their revenue and its potential to get them ahead and remain in control. A Berlin University academic and cryptography expert, Anish Mohammed, predicted that the entities that failed to tie advancing technology into their operations would end up the losers. “There will be winners and losers,” he said, “[and] the losers will be those who do not make any changes.”

The formal banking arena is abuzz with investigating blockchain and its benefits, although it is seen by some to lag behind other industries in actually applying the technology. In many ways, the technology could be very disruptive to the flow of banks’ income, many of whom make good money assisting clients in transacting and trading – an intercessory role that is potentially completely eliminated on the blockchain.

There are cost savings in that scenario too, but Moody’s MD for credit strategy, Colin Ellis, feels the ultimate winners will be the consumers who can enjoy cheaper service fees with blockchain apps. “It could reduce costs for banks.” he said, “but at the same time, could foster more competition that would put downward pressure on fees.” Ellis also said that any disruptive input, whether it be political, economic or a technology, “tends to result in winners and losers, and blockchain is no different.”

A recent Moody’s report pointed to the likelihood of blockchain technology indeed reducing cross-border transactions and other costs for finance houses, while also generating renewed competition among banks. Two European giants, the Netherlands’ ING Groep and Swiss Credit Suisse, have traded securities on a blockchain app recently to great effect. The transaction was almost instantaneous, as opposed to taking the usual 24 or more hours.

Better, Faster, Cheaper

The arena of international transacting is one that Ellis feels will be largely streamlined through the elimination of all the usual intermediaries, typically a number of banks. That blockchain simply sidesteps these players results in cost savings and faster transactions. There is some real-world application to date. Santander began employing a blockchain app in April to allow its retail customers in Spain, Britain, Brazil, and Poland to complete international transfers the same or following day.

CEO Ana Botin said that “One Pay FX uses blockchain-based technology to provide a fast, simple and secure way to transfer money internationally.” She pointed to the logical benefits of the app “offering value, transparency, and the trust and service customers expect from a bank like Santander.”

The One Pay FX system utilizes a blockchain app created by Ripple. According to the US consultancy IDC, about $2.1 billion will be invested employing blockchain apps globally in 2018. About a third of that will be affected by the financial services industry, the company said.

The list of industries that stand to benefit from blockchain technology application is endless, although manufacturing, shipping, retail, healthcare and professional services are obvious benefactors. “The technology is still at a relatively early stage. It is too soon to know what the final impact will be,” said Ellis.

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