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.