Is Blockchain Technology The Key To Restoring Trust In Financial Institutions?
By Nyarai Femai
Did you know that the financial services sector is the least trusted industry according to an American public relations firm’s annual research? (Tangel, 2013) The level of distrust might vary from place to place, however, it is safe to say that there is a significant number of (people all over the world) who do not have faith in banks. Now, if people do not trust institutions as custodians of their wealth then where should one store it? How can the financial services sector restore that trust?
Given its ability to uphold a higher level of transparency, could blockchain technology be the answer? Is it possible to solve issues of suspicions around the supposedly fraudulent activities (that are said to occur behind the closed doors of financial institutions) using a digital universal ledger? Perhaps Blockchain could make a difference. An ideal scenario would be when banks can protect the customers’ private information but still maintain a necessary level of transparency. This might not harm the integrity of financial institutions.
However, decentralists argue the use of this technology by centralised institutions may infringe on the principles of blockchain itself. This then leaves one wondering if decentralisation can exist in traditional financial institutions. Also, does the implementation of blockchain really help restore faith in banks without doing away with centralisation? Well, the South African Reserve Bank ran a trial program to address its proof of concept interbank clearance. Perhaps more trials of blockchain implementation by banks may help answer whether it is really the solution to the lack of confidence in the financial sector. Those that are skeptical can only pursue a wait and see policy and hopefully, more successful blockchain-based programs will arise.
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