How blockchain technology and other innovations change(d) the future of banking

Abstract

Abstract How Blockchain technology and other innovations change(d) the future of banking? Financial sector has become a fast-moving arena for new players, venture capitalists and technological innovators, where traditional banks are not fitting. It is essential for banks not only to embrace innovation, but also reconsider the whole value chain and relationships with a customer. New technologies like Blockchain could significantly reduce internal and external costs associated with banking services and contribute to a smother digital transformation. Blockchain is one of the key break-through technologies massively debated in the media and among financial expert is Blockchain technology. This technology is a decentralized ledger, working like a public ledger with distributed participants, where transactions are verified by the network, without any central authority. The system was created as an underlying system for a native cryptocurrency, more specifically Bitcoin. The beauty of the system is in its auditable, cost-effective and cryptographically protected secure nature. It is a new way to create and transform the value in the real-time. This disruptive technology is promising a real revolution in financial sector, which big banks don-t want to miss. There are already many use cases, where this technology can significantly improve banking operations and processes, among them are international payments, smart contracts, digital identity and smart assets. And many more to discover. The Blockchain technology is however in its early stage of experimentation, where there is a lot of uncertainty about, which dominant design of the technology will be adopted by the majority of financial institutions, and what is the time horizon for that. As there is a big interest from banks, regulators to investigate this technology in terms of justification of a business case and its usability, the adoption curve will be shortening year by year, as this collaborative actions will be bringing fruits very soon. There are however a lot of hurdles on the way, and one of them is a disparity of opinions and regulations of virtual currencies operated on the Blockchain in in different jurisdictions. If banks will cooperate in different geographies using a distributed ledger technology like Blockchain, there should be a regulatory framework created to harmonized this new value transfer. Banks at the same time, should carefully investigate all innovations existing on the market, before integrating them into their existing organizations. It is important to look at these innovations from the business case perspective, not just following the trend with the peers. The future of banks is not in fragmental update in their services or systems, but in redesigning their business models, reinvention of their new digital identities, and disruptive innovations can be just supportive steps on their transformations.