Blockchain is coming for the banking sector — and soon. While there’s still much to discover about the ledger technology underlying bitcoin, it’s certainly taking most industries by storm. A recent Accenture report notes that 60 percent of executives expect blockchain and smart contracts to be “critical to their organizations over the next three years.”
Banking, in particular, has a lot to gain from blockchain, with many top global banking CEOs coming out in favor of the technology and its potential to cut costs, simplify back-office practices and reduce risk, CNBC reports. Many CEOs acknowledge blockchain as a revolutionary technology that could completely transform the banking industry over the next few years.
“We believe there is huge promise in blockchain,” Carlos Torres Vila, CEO of the Spanish banking group BBVA, told CNBC in June. “It is early times in this technology, but it can bring about more efficient processes.”
In Kenya and the Philippines, blockchain is well on its way to facilitating payment and improving communication in the financial sector. India taps the technology for interbank transactions, with the initial pilot involving firms that are responsible for 80 percent of financial transactions in the country, the Accenture report finds.
Challenges Persist for Financial Blockchain Pilots
It should be noted there is still some reluctance to adopt blockchain in the U.S. financial sector.
Bitcoin.com recently reported CLS, a firm that provides foreign exchange settlement services to banks such as Goldman Sachs, JPMorgan, Barclays and Citigroup, had to water down its CLSNet service, an ongoing blockchain project, because many banks were reluctant to participate.
Alan Marquard, CLS chief strategy and development officer, explained to London’s Financial News that the pullback on the project was due to the volume of work banks put in to participate and get blockchain off the ground.
“You are not just installing a piece of software. They need to build operational knowledge and know-how,” Marquard said, adding that there were also possible security implications.
Blockchain Pilots, Tools Emerge for the Financial Sector
CLS itself seems undeterred, however, recently teaming with IBM on a proof-of-concept blockchain pilot with nine financial institutions, including Citi and Barclays.
“Building on the success of CLSNet and leveraging the strong relationship CLS has with the world’s leading financial institutions, LedgerConnect is uniquely positioned as a blockchain marketplace for the financial services industry, which will accelerate innovation across the ecosystem with value-added services for blockchain networks,” said Marie Wieck, general manager for IBM Blockchain in a press release.
This persistent optimism is underpinned by blockchain-based tools emerging for the banking industry.
Samsung is perhaps ahead of the game on this front, releasing two blockchain tools for the banking sector in 2018: Nexledger, a blockchain-based finance platform and, running on top of that, BankSign, a co-verification tool for banks.
Executive Vice President Hong-Jun Ryu hailed BankSign as the “first example of applying blockchain technology … to banking services” and vowed to continue seeking ways for blockchain to facilitate digital transformation for banks and financial institutions.
While there’s still much to see about how this technology plays out in the financial sector, there’s no doubt that the hype around blockchain is met by real tools and solutions, and it won’t take long for the tech to find its footing.