The Blockchain Revolution: How it’s Disrupting the Banking Sector
The End of Traditional Banking as We Know It?
The rise of blockchain technology has sent shockwaves through the banking sector, with many experts predicting that it will subvert traditional banking services. But is this a threat or an opportunity for banks? In this article, we’ll explore the impact of blockchain on the banking sector, from payment and clearing to financing and securities.
A New Era of Financial Transactions
Blockchain technology is changing the way we think about financial transactions. No longer do we need intermediaries like banks to facilitate transactions between consumers. Blockchain allows for fast, low-cost, and secure transactions, making it an attractive alternative to traditional banking.
The Problem with Traditional Banking
Traditional banking is a slow and expensive process. Cross-border transactions, for example, can take up to three days to settle, and the cost of these transactions can be as high as 7.68%. This is not just a pain point for consumers but also for banks, which have to deal with the complexities of global financial infrastructure.
The Rise of Blockchain-based Solutions
Companies like TenX, BitPesa, and BitPay are already using blockchain technology to provide fast and low-cost payment solutions. For example, TenX has developed a way to bind credit card wallets to digital currencies, allowing users to easily pay anywhere. BitPesa has also used blockchain to reduce the cost of cross-border payments in Kenya, from 9.2% to 3%.
Clearing and Settlement Systems
Blockchain technology can also subvert the traditional clearing and settlement systems used by banks. By using a decentralized “book” of transactions, blockchain can reduce the need for intermediaries like correspondent banks and custodian banks. This can lead to significant cost savings for the financial industry, estimated to be as much as $20 billion.
Enterprises like Reboxetine and R3
Companies like Reboxetine and R3 are already working with banks to provide blockchain-based solutions for clearing and settlement. Reboxetine, for example, is trying to subvert the SWIFT network by providing a fast and two-way communication protocol for banks. R3, on the other hand, aims to become a “new operating system on the financial markets.”
The Future of Banking
While some may see blockchain as a threat to traditional banking, others see it as an opportunity to improve efficiency and create new financial business models. The financing field, for example, is already being disrupted by blockchain-based solutions like initial coin offerings (ICOs).
The End of Venture Capital as We Know It?
Programs to raise funds through venture capital are already being disrupted by blockchain-based solutions like ICOs. This can reduce the need for intermediaries like investment banks and venture capitalists, making it easier for entrepreneurs to raise funds directly from investors.
The Rise of Decentralized Finance
Blockchain is creating a new financial business model that is decentralized and transparent. This can lead to a more efficient and secure financial system, where transactions are faster and cheaper. But it also raises questions about the role of traditional banks and financial institutions in this new system.
Conclusion
The rise of blockchain technology is disrupting the banking sector in ways that were previously unimaginable. From payment and clearing to financing and securities, blockchain is changing the way we think about financial transactions. While some may see this as a threat to traditional banking, others see it as an opportunity to improve efficiency and create new financial business models. The future of banking is uncertain, but one thing is clear: blockchain is here to stay.
Key Statistics:
- 55% of surveyed companies are monitoring, researching, or developing solutions based on blockchain. (Source: International Securities Association)
- The total global banking assets are nearly $134 trillion.
- Cross-border transactions, from payment to credit business, created 40% of the global payment transaction revenue in 2016. (Source: Banco Santander)
- The average bank transfer takes three days to settle.
- The cost of cross-border transactions can be as high as 7.68%.
- Bitcoin transaction settlement takes about 30 minutes, in extreme cases may require 16 hours.
- The daily confirmed Bitcoin transaction amount increased 8-fold from 50,000 to 400,000 from 2014 to the summer of 2018.
- Bitcoin cash transaction costs are already low, about 20 cents per transaction.
- The company TenX has developed a way to bind credit card wallets to digital currencies, allowing users to easily pay anywhere.
- BitPesa has used blockchain to reduce the cost of cross-border payments in Kenya, from 9.2% to 3%.
- Reboxetine is trying to subvert the SWIFT network by providing a fast and two-way communication protocol for banks.
- R3 aims to become a “new operating system on the financial markets.”
- The estimated cost savings for the financial industry using blockchain technology is as much as $20 billion.
- The financing field is already being disrupted by blockchain-based solutions like initial coin offerings (ICOs).