Blockchain may be the payments industry’s greatest recent success story.
No, really. Which other payments technology, in recent years, has developed so far so fast as the blockchain? (We’d better call say distributed ledgers, of which blockchains are one example, but it doesn’t quite roll off the tongue.) Even further, blockchain has broken beyond payments into the fields of authentication manufacturing, energy, and more — and it all started with payments. (Remember bitcoin?)
James Wester, research director at IDC Financial Insights, authored a report, released late month, laying out blockchain use cases for financial institutions still in learning mode in the space — and that would be most of them. Blockchain, Wester said, “encompasses many of the technologies moving through the industry today — mobile, social, cloud, and Big Data.” The development of bitcoin happened to address some problems in banking — costs, transparency to regulators, speed — “almost by chance,” Wester said. Certainly, early bitcoin evangelists must be gritting their teeth at the financial services industry’s current blockchain lovefest.
And concrete uses are already being deployed. The Australian Securities Exchange is piloting distributed ledger tech from Digital Asset Holdings, as has been reported. D +H recently has completed a proof of concept on distributed ledgers as another payment rail and is now talking to banks about incorporating the technology. SWIFT is working on incorporating distributed ledgers into correspondent banking.
But for banks still considering use cases, IDC’s report may be a good place to start. In it, Wester lays out 10 ways blockchain will make itself felt in ways that may affect banks.
- Security – blockchain has the ability to improve edge security and encrypt data during transactions, rather than when the data is moving or at rest.
- Cloud – Blockchain can remove the need for a trusted party in transactions taking place in the cloud.
- Truly digital transactions — The blockchain enables secure microtransactions, still a developing area.
- IoT – Blockchain can improve the security of automated transactions in the Internet of Things.
- Settlement times — Blockchain can vastly improve settlement times of many payments transactions.
- Government — Issuers of currency may leverage the blockchain, and very soon, according to some.
- Health — Health records can be securely stored and shared via the blockchain.
- Manufacturing — Blockchain can connect and automate processes between different factories (nodes).
- Retail – Blockchain can drive down transaction costs at the point-of-sale.
- Energy – Blockchain can change the way electrical use is billed.
And, we might add, smart contracts.
Learn more about virtual currency and distributed ledgers at Bank Innovation 2016 in Seattle, Feb. 29 – Mar. 1. Request your invitation here.1 - Reader Likes This Post