Blockchain in Banking
How can Blockchain revolutionize Banking?
Blockchain technology has received a lot of attention in the last decade
for different reasons. However, the question remains unanswered-
"Will blockchain revolutionize the banking industry?"
Blockchain and buzz around it
Undoubtedly, "blockchain" is one of the year's most popular technical
buzzwords. While there is still a lot of hype surrounding blockchain, we
are starting to see actual initiatives.
Let's start with what it isn't. It's not only about Bitcoin and
cryptocurrencies when it comes to blockchain. Of course, these are the
most well-known blockchain applications, but the technology is capable
of doing much more and can be applied to a wide range of industries.
Blockchain technology has advanced rapidly in recent years as more
companies, researchers, and developers have begun to test it and are
witnessing the results.
The whole argument around the blockchain, that it will revolutionize the
financial sector stands true because the technology has evolved through
various stages as per the “Gartner hype cycle”.People have gradually
shifted into the "disillusionment" phase, fundamentals are substantially
changing on the ground and actual progress is taking place.
Over the last few years, the space has matured exponentially. A large
number of professionals have stepped out from traditional banking and
shifted to the blockchain industry with the idea of building on what
could emerge as the most disruptive technological advancements in the
coming future. We are not saying to get away with the traditional
banking systems. Instead of opposing institutional players, we can
collaborate with them to accelerate blockchain adoption.
Now various concerns keep popping into our curious minds regarding
blockchain technology, but here is something that industry experts have
shared :
“Blockchain is the biggest opportunity set we can think of over
the next decade or so”
Bob Greifeld, Nasdaq Chief Executive
Across the board, we are seeing numerous signs of progress: an increase
in the number of institutions looking into this domain; the formation of
government-led task force groups and initiatives to assist in the
clarification of a regulatory framework concerning the technology; huge
amounts of capital invested by the big tech firms in research and
development. According to a Gartner report, the business value added by
blockchain will be slightly more than $176 billion by 2025, rising to
more than $3.1 trillion by 2030.
Blockchain technology does not require permission hence regulation can
be a significant impediment to widespread adoption. Some progress is
being made on this front, but the global regulatory challenge is far
more difficult.
Various banks have tried implementing blockchain technology such as JP
Morgan, which unveiled JPM Coin in 2019, becoming the first global bank
to design a network to facilitate instantaneous payments using
blockchain technology, enabling 24/7, B2B money movement. In 2015,
Citibank launched three blockchain-based systems and pilot
cryptocurrency Citicoin to evaluate its functioning for cross-border
transactions.
Blockchain and distributed ledger technology (DLT) have enormous
potential to disrupt the banking industry by disintermediating key
services provided by banks, such as lending, payments, clearance and
settlement systems, trade finance, customer KYC, and fraud prevention.
As a result, the prospect of incorporating blockchain technology can
fundamentally transform the existing operating models of the banking
industry.