How Blockchain will Disrupt the Banking SystemRichard Ogunsola
Blockchain is transforming every sector of our existence, especially in the financial market. Where drastic evidence can be seen with the advent of seamless payments transactions, to the elimination of middlemen in fundraising, unparalleled transparency in smart contract
but to mention a few. As this developing technology picks up momentum, our traditional banking industry will be forced to embrace its enormous functionality or be replaced by it?
Although many notable financial experts have predicted bitcoin and other cryptocurrency’s doom, worthy of note is that by an executive of JP Morgan (one of America’s biggest bank).
“…it’s worse than tulip bulbs. It won’t end well. Someone is going to get killed.”
Yet going by a recent survey by The International Securities Association, 55% of global companies are monitoring, researching, or developing solutions on top of the blockchain technology.
Blockchain technology provides a cryptographically secure way of sending digital assets, without the need for trusted third parties — such as banks.
Areas Blockchain Will Disrupt the Banking System.
The potential of Blockchain as a decentralized and transparent technology would disrupt archaic banking systems in the areas of:
1. Payments: By eliminating the need to rely on intermediaries to approve transactions between the payer, payee and other related parties. The blockchain technology could facilitate faster payments at lower fees than banks.
2. Clearance and Settlement Systems: Blockchain’s distributed ledgers can reduce operational costs and bring us closer to real-time transactions between financial institutions.
3. Fundraising: Countless number of blockchain companies have gotten pretty quick access to funds/liquidity through initial coin offerings (ICOs) which is similar to the Security & Exchanges’ Initial Coin Offering (IPO). Blockchain is creating a new crypto-economic model of
funding that ridicules traditional access to capital from financial institutions.
4. Banking the un-banked: Cryptocurrencies has inherent potentials to surpass the reach of most banks. For example in Nigeria, where there’s roughly 5000 bank’s branches with the unavailability of banks in most city outskirts and remote locations. Seamless banking can be done on the blockchain without fear of fraud or theft deriding our banks on regular basis.
5. Loans and Credit: By removing the need for gatekeepers in the loan and credit industry, the blockchain can make it more secure to borrow money and provide lower interest rates.
6. Smart contracts: This blockchain use-case automates many of the tedious processes within the banking industry, from contract compliance, claims processing, Will content distribution, C of O etc.
Other areas to watch out for blockchain include tokenisation of securities, store of value, rewarding loyalty, speed, operational efficiency, KYC, privacy, scalability etc
“Blockchain is a game-changer in the industry and no financial services firm can afford to ignore it.”
– Anirban Bose