Banking Firms Increasingly Experimenting
Blockchain technology has the subject of experiments for almost all global banks now. This technology promises operational efficiencies as well as improved cost savings which is what the banks are ultimately after. Various methods are being used by banks as they seek to explore and utilize the technology. Some of them have entered into partnerships with fintech companies while others have become members of global consortia. Many banks have also opted to invest in their own solutions in-house.
Blockchain Use in Financial Sector
The majority of banks are experimenting with the use of blockchains in streamlining their processes. Cutting costs is also one of their aims. At the same time, banks also want to make use of the other advantages provided by blockchain technologies. One of the most important of those advantages is that they can remain competitive with fintech companies. Banks become capable of developing newer business models as well.
Blockchain technologies can certainly provide several benefits. However, banks are focusing on the more tangible ones. They are exploring the use cases of the technology which can actually solve real-life problems which occur in the banking sector.
Of course, banks are not the only ones interested in this technology. Blockchains have increasingly become the interest of regulatory bodies. After all, the regulators need to understand the technology if they are to oversee its usage. As a result, they have begun to start working with major banks in the development of regulatory frameworks.
Banks are certainly not going to be the only ones in the financial sector to use blockchains. Solutions based on this technology are certain to be developed for various domains of financial services. Solutions will be required for resolving specific issues while developing a network that is big enough to be beneficial.
The Applications of Blockchains
According to a survey by Accenture, 9 out of 10 commercial banks in Canada, Europe and USA, have already started to explore the potential of blockchain for payments. The survey was conducted among 32 professionals from some of the top banks in those regions. Approximately 30% of the banks have already entered advanced stages of their experiments with blockchains in this regard.
In the field of payments, the most significant use cases are cross-border transfers within the same bank. In fact, 44% of banking professionals consider this process to be their primary priority. The other important areas of focus are on remittances across borders, cross-border transfers between different banks and corporate banks.
The Reasons for Use
Banks are investing in blockchains for a simple reason. They expect the technology to lower their administrative and frictional costs. Settlement times for the banks can also be sped up while reducing the exceptions and errors present. Blockchains can also present banks with newer revenue opportunities.
The fact is that blockchain technology has already proven that it is highly scalable. As a result, it can support the infrastructure demanded by the banking sector in payments. In fact, payments can be the first area where blockchain technology adoption can be tried out. It might not be long before that happens.