Banking As We Know Is Changing, Long Live The Blockchain
Blockchain has the potential to create upheaval in the way lots of day-to-day processes and transactions are conducted and banking is one of them. While it’s too early to say if blockchain will revolutionize the banking industry, it most certainly is having an impact.
BLOCKCHAIN’S IMPACT ON BANKING
Experts say blockchain will have a transformational impact on the banking industry. “I see banks adopting blockchain technology to improve efficiency, cost-effectiveness, and security. They will achieve it throughout the entire spectrum of financial services”. Said Param Vir Singh. Carnegie Bosch associate professor of business technologies at the Tepper School of Business. (Carnegie Mellon University).
Banks have already started moving in this space, Singh also said:
Some of them have already started forming consortiums where they are testing out use of blockchain for inter-bank transfers,” “I think the key applications would be in space of payments, fraud reduction, know your customer, and loan processing. Banks realize that there are tremendous incentives to streamline and automate their processes through smart contracts.”
PNC bank is collaborating with Carnegie Mellon through the PNC Center for Financial Services Innovation. So they can figure out what solutions a bank could provide on a blockchain.
A REPLACEMENT FOR BANKS?
Although the impact of blockchain on banking could potentially be significant, experts don’t expect it to replace traditional banking for transactions such as lending anytime soon — if ever.
“Blockchain technology still has a lot of limitations due to tradeoffs between scalability and security,” Singh said. “The technology needs to evolve significantly before it starts making a serious impact.” On the other hand, there is a lot of uncertainty regarding regulation related to blockchain technology.
t’s too early to say whether blockchain will replace aspects of banking, said Rajesh Kandaswamy, research director at Gartner Inc. “The technology has potential, but the adoption rate is so little worldwide,” he said. “The hurdles are that the current systems — institutions, processes, culture, and technologies — have massive network effects and might not have the incentive for radical change.”