Will Blockchain Technology Help the Banking Industry

Blockchain Technology is not only set to revolutionize the world but it’s already making inroads into various sectors of a host of industries globally. The financial industry seems to be the frontline for developments of this technological innovation just as it was the case with Bitcoin when it was first rolled out in 2009 and disrupted the financial payment systems of the world and it is something that the likes of GALLACTIC Blockchain, an emerging next generation blockchain platform, continues to do.

Many questions have been asked regarding all the possibilities for change and improvement that Blockchain Technology can bring not only through the cryptocurrency realm but through its other technological facets such as the distributed ledger technology, smart contracts, technical standards (e.g. ERC-20), various and differing blockchain platforms, countless crypto-tokens and applications. One of the main questions asked, is whether the much-hyped enhanced transparency that Blockchain Technology will foster, can help the banking industry?

What is Blockchain Technology?

Blockchain is basically a distributed ledger where encrypted data and records are replicated amongst its participants or nodes and cannot be changed or erased. It provides for a decentralised ecosystem in the form of peer to peer networking where there is no need to rely on a third party intermediary wielding control over the asset rights managed by ‘smart contracts’ (predetermined self-executing programs). This provides a means where complete data of transactions will be shared between participants of a public ledger or for those permissioned on a private platform in almost real-time basis. In other words, there is more transparency where Blockchain Technology is used.

Blockchain’s Potential Uses In Banking due to Its Transparency

This potential for transparency internally and externally can help provide banks the opportunity to replace certain middle and back-office functions. It also provides unprecedented cohesion to internal bookkeeping procedures, show an account of consensus with audit trail of transactions that have been cryptographically encoded, create almost real-time settlement and strengthen risk management both ways for the bankers and their clients alike. All these will see cost savings in time and labor requirements, reduced paper work and elimination of repetitive work, reduction of fraud and illegal activities, and decentralisation among other things.

Some say because of the transparent nature of Blockchain Technology, it does not need to be regulated, hence there will be tremendous cost savings being realized by Financial Institutions in this area for Banks etc. Banking wise this transparency can basically negate the need for checks and balances that usually take-up important resources and manpower.

This is what big banks like JP Morgan, Citibank, HSBC, Barclays, Banco Santander, Bank of America, Bank of Australia and others are hoping to leverage, with their investments and Proof-of-Concept (PoC) initiatives. The drive to reduce costs and increase efficiency has led to a variety of projects with various FinTech’s such as Ripple, Ethereum, R3, Transfer Wise and a list of other startups to find ways to adopt Blockchain Technology more expediently into their operations in their desire to improve bottom line figures.

Although not a business sector to sit on its laurels when it comes looking at ways to streamline its operations in the desire for greater efficacy and profit, introduction of blockchain technology comes with its own fair of challenges. This is very evident in the dearth of developers, data scientists and such, a situation that is changing albeit it slowly.

As the song goes “the future’s so bright , I gotta wear shades” because the Blockchain juggernaut is nowhere near its end yet…