BankingPractical applications of blockchain in Banking
Banking stands to be disrupted by blockchain technology more than any other industry. Since a blockchain is a digital and tamper-proof ledger, it becomes an alternative to banks and traditional methods of financial transactions. The blockchain brings even more accuracy and information sharing into the financial services ecosystem.
Once banks realized the blockchain’s potential, they started adopting this technology. Swiss UBS and UK-based Barclays, for instance, apply blockchain technology to expedite their back-office operations and settlements.
Another example of blockchain adoption in the banking industry is a project to create a digital currency for financial institutions. This project was launched jointly by Deutsche Bank, UBS, Santander, and the Bank of New York Mellon to settle financial trades more securely, transparently, and quickly.
Meanwhile, the predictions for further blockchain development sound very promising: according to the Financial Times, implementing blockсhain technology in banking will cut up to $20 billion in third-party costs. Another cost-efficiency forecast has been laid down in the Santander FinTech study, which suggests that by 2022 banks should expect yearly reductions in infrastructure costs of between $15 billion and $20 billion.
While these predictions are encouraging for global banking giants, how can medium or small businesses capture their share of the banking industry?
One successful example of blockchain application in banking is Ripple, a company that helps banks process international payments. Using a blockchain model, the company has built a real-time gross settlement system that allows quick and accurate payment processing.
Another great example of the blockchain applied to banking is the startup R3 CEV. The core idea of this startup is to build a platform and commercial applications for distributed ledger technology. By bringing together 80+ banks, technology partners, and regulators, R3 CEV aims to become a “new operating system” for financial markets.
Benefits of blockchain technology for the banking industry:
Shorter settlement times
Improved data quality