Blockchain suggested for retail banking
Blockchain could revolutionise retail banking by increasing efficiency and expanding options for products and services, says Global Data, a data and analytics company.
The technology, originally devised for the cryptocurrency Bitcoin, is essentially a digital ledger that records financial transactions as a shared and continuously updated database that isn’t stored in any single location. The information is non-centralised and impossible for hackers to corrupt, which can be extremely useful for banks and other financial institutions.
“The need of the hour is to focus on domains where the legal, regulatory, or political environments hinder the establishment of a central controlling authority, crucial for the commercial adoption of blockchain,” said Sean Harrison, retail banking analyst at Global Data.
The firm said retail banking could most benefit from blockchain through smart contracts, customer data, payments, fraud reduction and customer management.
Complex contracts such as mortgages can be made more efficient through the blockchain. These smart contracts can create full electronic audit trails, expedite fund releases and cut out middlemen in the process, he said.
Blockchain can also help banks share verification information, known as “Know Your Customer”, which can be shared between organisations, saving time and administrative costs. By streamlining this process, every institution would not have to conduct its own verification testing.
Cross-border payments could also be simplified. Instead of sending money through various banks and currencies, blockchain can enable money to be transferred through a cryptocurrency instead, cutting down the fees and exchange costs.
Leaks of sensitive information is a nearweekly occurrence among major institutions. By decentralising and encrypting the data of financial transactions, blockchain can greatly reduce cybercrime in the banking industry.
“The fear of missing out on blockchain is palpable, but in the rush not to miss the boat incumbent banks must ensure they to get any deployment right and create value for customers,” Mr Harrison said.