Blockchain in the financial services industry

Blockchain is the latest buzzword in the financial services industry

Attracting billions of dollars in venture capital investment from some of the world’s leading financial institutions, Blockchain is set to revolutionize the way that we work. But just how much of an impact can it have, and how can this digital, decentralized, distributed transaction ledger spin the industry on its head?

Capital markets and Blockchain

Blockchain technology can be utilized to streamline the trading process and to provide simplification in the automated trade life-cycle whilst providing access to all of the involved parties, simultaneously. In this case, Blockchain technology can vastly reduce costs relating to infrastructure as well as improving the efficiency of data management, processing cycles, and reconciliation. It is also expected that it will provide greater transparency and could even cut out the necessity for brokers.

The first financial services entity to create a product based on Blockchain technology was Nasdaq. By using Blockchain to power capitalization tables to manage shares in their companies, Nasdaq Linq is the first step towards fully embracing Blockchain technology in the capital markets industry, and it is expected that other leading entities will soon follow suit.

Cross-border payments and Blockchain

When it comes to cross-border payments, the implementation of Blockchain technology will significantly speed-up and simplify the process. Currently, when making cross-border payments, an individual or a company usually has to go through a complicated procedure, wait several days, and pay costly fees for the privilege. By using Blockchain, costs can be reduced and many of the middlemen can be cut of the process. At present, the cost of remittance is between 5%-20% of the sum being sent. By using Blockchain, one could reduce the costs to 2%-3% of the total amount, whilst providing secure, real-time transactions across any border.

The first financial services company to implement such a process was Santander, who used Blockchain to transfer international payments through a mobile application. The platform they developed uses technology from Ripple, who created and developed the Blockchain-based payment protocol and exchange called RippleNet.

Digital identity and Blockchain

Verification and protection of online identity is becoming an increasingly important task in today’s digital world. By moving online identity to a Blockchain infrastructure, users can decide how they choose to identify themselves, as well as who they share their identity with. Users of the applicable network or platform still need to register their identity on the Blockchain, but once this has been done they do not have to set up a new account for each and every service provider, as long as those service providers are operating on the Blockchain.

Blockchain can also be utilized and adapted to assist companies with their KYC and due diligence requirements by referring to a single source of identification information, such as that which is stored on the Blockchain. This will lead to a faster and more efficient account opening process, increased privacy, as well as reduced resource and personnel costs.

Loyalty, reward, and Blockchain

Some of the many benefits of Blockchain include transparency and traceability. This gives banks and insurers the ability to create more enticing and interesting loyalty and reward programs for their customers. By creating a more captivating rewards system, companies can truly realize the full value of such a program to both attracting and retaining their clientele.

Back in 2016, Deloitte announced a new partnership with Loyyal, a company which focuses on facilitating loyalty and reward applications using the Blockchain. They created a pilot program which used the fledgling Deloitte cryptocurrency to offer rewards and incentives to repeat and loyal customers.

Financial services, Blockchain and the future

There is no doubt that the power of Blockchain will continue to grow, and that the uses and benefits we have witnessed so far, are just the beginning. As more companies, firms, and entities begin to realize its power and uptake increases, Blockchain should cement its position as one of the most important developments in the digital world of the last 20+ years.