Blockchain technology: use cases and potential global impacts

In 2017, Bitcoin and other cryptocurrencies experienced unprecedented price surges. Some are speculating this is a bubble. Others are investing heavily. Whereas others, looking beyond price movements and speculation are creating numerous solutions from the technology behind cryptocurrency, the Blockchain.

Financial services, for example, is one sector that needs and is investing heavily in Blockchain and “smart contract” and ledger technology.

Making it easier for banks to send secure, encrypted, automatically validated, fast and tamper-proof transactions would transform financial services. Banks are all using legacy technology, with modern solutions grafted on. Many professionals, in senior compliance, audit, CFO and CTO are worried this technology stack will start to collapse. Potentially, crippling the financial sector in years to come.

Innovative investments are required now to ensure technology banks use — systems that impact every single one of us with a bank account, debit or credit card, mortgage, loan, insurance policy and any other financial product that we need — keeps working, not just now, but twenty, thirty years into the future. Legacy systems and short-term fixes aren’t expected to keep working that long.

Blockchain in financial services

The top tier of global financial institutions are taking this seriously.

Several central banks, including the People’s Bank of China and Danish central bank, are testing digital currencies, based on Blockchain. The International Monetary Fund (IMF), once sceptical of cryptocurrencies, issued a discussion note to staff in June 2017: “Rapid advances in digital technology are transforming the financial services landscape, creating opportunities and challenges for consumers, service providers and regulators alike.”

Barclay’s is taking an interest in creating and launching a digital currency in the UK. Reports indicate they’ve already started working with several fintech startups and talked to the Financial Conduct Authority (FCA) about this.

Other banks, including a worldwide consortium — that initially included Deutsche Bank, HSBC, KBC, Natixis, Rabobank, Societe Generale and Unicredit — are already working to dramatically shrink the time it takes to make an international payment.

Eighty of the world’s largest banks have been working with R3 to create Corda, a distributed ledger platform that is the outcome of over two years of intense research and development. A financial grade ledger, Corda meets the highest standards of the banking industry, yet it applies to any commercial scenario.

Blockchain for those without banks

Blockchain could also have a positive impact on billions of ‘un-banked’ too; those who are currently excluded from the financial services sector.

In South East Asia, IBM is creating and testing Blockchain technology in partnership with Blockchain startup Stellar and KlickEx, a money transfer operator. This is one region where people send billions in cross-border payments and purchases — with one huge downside: the cost and time it takes to send this money. Reducing the cost and time it takes to send money could generate enormous benefits for local economies, and this is something that could be implemented in other regions, such as Latin America and Africa.

Other banks are already using Blockchain and customised smart contract technology to facilitate capital market transactions, corporate finance and trade finance. Executing traditional Letters of Credit contracts can take weeks or months. Barclays’, working with Israeli fintech, Wave, was able to execute this process in hours, guaranteeing “the export of $100,000 worth of agricultural products from Irish cooperative Ornua to the Seychelles Trading Company”, according to Business Insider.

Other business applications

IBM is already working with the global shipping giant, Maersk, to trial the real-world impact of the Hyperledger Fabric. Hyperledger Fabric is a blockchain framework allows for the development of modular apps or solutions, designed by IBM and Digital Asset. It has been created to host smart contracts, known as a “chaincode”, replacing and improving on legacy asset management and shipping tracking solutions, and far more secure.

Healthcare and insurance are other sectors already experimenting with blockchain technology. So are real estate technology companies, the media, energy sector and even governments. Blockchain is everywhere. Anywhere legacy technology slows down a process, makes something more difficult, or where efficiency savings can be made, Blockchain can be used and applied to improve operational processes. In time, we are going to see massive real-world impacts as a result of all of this innovation.

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