The traditional banking sector has survived and prospered for centuries without too much change.
However, one of the greatest threats to the banking sector as we know it is technology. The biggest potential disruptor for the financial sector today comes from applications involving blockchain technology.
Blockchain is the tamper-proof system of distributed ledgers that power cryptocurrencies such as Bitcoin. The technology behind blockchain offers greater transparency, efficiency, and veracity across the digital information ecosystem. Banks, under increasing AML (anti-money laundering) and regulatory pressure, are waking up to the fact that blockchain is a technology that should not be seen as competition, but as an important tool to facilitate trade and commerce, which in many ways, is what banks were originally set up to do.
Blockchain offers greater efficiency to the banking sphere. For example, at a very basic level, it enables cross-border transactions to be made in real-time and money to be exchanged at the fastest possible speed. It injects enhanced accuracy and data sharing into the financial services ecosystem, which benefits everyone.
Global Banking Institutions Embrace Blockchain
Initially, banks were slow to embrace blockchain technology, but like an avalanche, the adoption has gathered considerable momentum over the last couple of years. Now, global banking institutions are rising to the challenges and opportunities that blockchain presents.
Credit Suisse partnered with New York-based startup Paxos to utilize blockchain tech to settle stock trades in the US. JPMorgan Chase dived into the blockchain space with the introduction of the JPM Coin, which will be used to facilitate transactions across institutional accounts. Goldman Sachs, Citigroup, and Spanish bank Banco Santander have also experimented with blockchain.
Meanwhile, San Francisco-based Blockchain company Ripple has partnered with more than 300 customers, including financial institutions such as Western Union and Santander.
The decentralized, tamper-proof, immutable nature of blockchain technology makes it ideal for reducing costs and streamlining just about everything in the financial sector. Blockchain technology is now being taken very seriously by the financial sector and rightly so.
It now no longer is being seen as a disruptor in the finance sector but as an enabler.