Will the blockchain destroy or revolutionize the banking system?

ATwhen the banks had to fight against the fall in interest rates and the innovations of fintech,  they now have to face blockchain technology and its impacts on our economic, monetary, and financial system. 

Indeed, many companies in the financial sector are now using blockchain technology to reinvent the world of finance. They are developing new applications that compete directly with certain solutions already offered by traditional banks. 


Al golds it is common to think that blockchain is an alternative to the traditional banking system, it could instead be seen as a new tool to use in order to transform the risk posed blockchain for banks into an opportunity. 

Understanding blockchain technology

While blockchain has become more democratic with the publication of the Bitcoin white paper written by Satoshi  Nakamoto and published in  2008, blockchain technology is much older. 

It is based on many years of work and research in economics, finance, IT, and cryptography. 

To define blockchain, let's start with the explanation of Blockchain France.  

The blockchain represents "a technology for storing and transmitting information that is transparent, secure and works without a central control body". 

The blockchain,  or blockchain in French, therefore functions as a digital ledger grouping together all the transactions carried out without going through a trusted third party.  

It is open to everyone  (in the case of a public blockchain),  distributed, decentralized, and immutable.  

The blockchain works thanks to numerous computers that validate transactions, secure, and maintain the network. These network participants are called minors. 

The blockchain can, therefore, be compared to an Excel sheet with all the transactions recorded in chronological order and containing a set of data  (issuers, recipients, types of assets traded, for what amounts, dates, and times, etc.)  which do can neither be changed nor canceled. 

To summarize,  the objective of the blockchain is to secure transactions made on the network in a decentralized manner and to make them more transparent. 

It is for these reasons that the banking system must take an interest in blockchain so as not to be left behind. 

The impact of blockchain in financial institutions

Anne-Sophie Luçon, Practice Manager at Michael Page, explains that “  the blockchain is shaking up the codes of the banking sector and is changing the way of exchanging and protecting exchanges. It helps to ensure data security during transactions and payments between different users. " 

First, it is important for financial institutions to study and test this technology. So it s  Pour has to determine important development levers to better understand its true value.  

One of the most recognized development axes by banks is the use of blockchain in the field of payments.  

It turns out that many studies show that this technology would make payments safer, more transparent, and faster - not to mention the significant reduction in fees.  

A  study by the bank Santander  shows that  the use of technology could allow blockchain  to  a saving of 15 to 20 billion per year by 2022  for the sector, including through the reduction of "costs infrastructure related to international payments, trading and compliance » 

In the long term, the study, testing, and use of the blockchain could, therefore, apply to areas that go far beyond payments.  

It could, for example, apply to: 

  • Securing sensitive data, 
  • Improving compliance with the identification and knowledge of the customer  (KYC)  with  the creation of an  identity  digital, 
  • The decrease in the number of intermediaries in all types of exchanges,  
  • Improving the application and monitoring of legal clauses in contracts with  “  smart  contracts  ”  , 
  • The optimization of the administration with the automation of certain tasks, 
  • Reduction of errors and fraud,
  • Etc. 

Will the blockchain destroy or revolutionize the banking system?

The blockchain is undoubtedly a technological revolution that p our has it has seen a significant impact on the areas of banking and insurance based on how it will be integrated into this industry. 

More so,  the blockchain will certainly profoundly change the relationship between customers and banks,  insurers, and other financial institutions, who want to make this technology an ally and not an obstacle.  

As they  work hard to study, understand, and test it,  blockchain technology could: 

  • Use an immutable private distributed registry  between specific users, 
  • More transparent, safer,  faster  and cheaper transactions, 
  • A significant improvement in the process and the protection of payments and transfers, 
  • To facilitate and automate the compliance, audit and  reporting work, 
  • D obtain  optimized processes with better digital identity (KYC compliance with procedures), better-empowering processes and exchanges, reduced fraud, 
  • Cost savings.
     

The study of the blockchain will also allow us to better anticipate the impact of this new technology on the professions of the financial sector, in particular in the services of payments, money transfers, commercial financing, or even the foreign exchange market.  

“It is still difficult today to detect the recruitment prospects linked to the blockchain. However, its impact on the very structure of the banks is undeniable, ”underlines Anne-Sophie Luçon.  

The integration of the blockchain in the financial sector should, therefore, make it possible to optimize the processes, the execution, and the profitability of the actors by shaping new financial services that rely on its technology  (micro-credit, micro-payments, transactions almost free, etc.).  

The blockchain should revolutionize the banking sector more than destroy it. 

Despite the indisputable advances,  let's not forget that this technology is still in its infancy. It still has to face many technical, regulatory, and security challenges,  which considerably slows its development.  

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