Blockchain, the shared ledger technology which allows any participant in a business network to see the system of record – will have a transformative impact on a number of industries, including financial services, in the future. Blockchain is still in its relative infancy, but a number of initiatives under way are already driving its progression to an industrial solution which will yield several important benefits in the context of the transfer of assets within business networks.
Originally developed as the technology underlying Bitcoin, blockchain has quickly risen to fame for its ability to create a vast, globally distributed ledger running on millions of devices, capable of recording anything of value. A blockchain is essentially a digital, distributed transaction ledger with identical copies maintained on each of the network’s members’ computers. All parties can review previous entries and record new ones.
Transactions are grouped in blocks and recorded one after the other in a chain of blocks (hence the name “blockchain”). The links between blocks and their content are protected by cryptography, so previous transactions cannot be destroyed or forged. This means that the ledger and transaction network are trusted without a central authority or a middleman.
The blockchain’s ability to record, store and move any kinds of assets with great ease, automation and in a decentralized manner has sparked interest from startups and the overall financial services industry which are envisioning possible use cases and applications in multiple areas.
Blockchain for cross-border payments
Blockchain can improve cross border payments by speeding up and simplifying the process, while reducing costs significantly and cutting out many of the traditional middlemen. At the same time, it would make money remittances more affordable.
Until now, the costs of remittance were 5-20%. Blockchain technology could reduce the costs to 2-3% of the total amount and provide guaranteed, real-time transactions across borders.
Blockchain to improve digital identity
When online identity is moved to a blockchain-enabled infrastructure, users are able to choose how they identify themselves and with whom their identity is shared.
Users are still required to register their identity on a blockchain, but once they have, they don’t need a new registration for every service provider, provided those providers are also connected to the blockchain.
This application of blockchain technology can be used for instance for know-your-customer requirements where a digital single source of identification information could enable more seamless account opening, reduced resources and costs, all while maintaining the privacy of data.
Blockchain in capital markets
Blockchain technology can simplify and streamline the entire trade process and provide an automated trade lifecycle where all parties in the transaction have access to the exact same data about a trade.
In this scenario, the technology would substantially reduce infrastructure costs, enable effective data management, transparency, faster processing cycles, minimal reconciliation and even cut out some of the middlemen such as brokers.
Blockchain technologies are reshaping the landscape of financial services. Existing inefficient business models and profit pools are beginning to face risk of disruption by upstart highly efficient blockchain-based platforms. Substantial benefits are to be gained using blockchain technologies, especially in back-office operations and to improve transparency, which is highly favored from an audit and regulatory perspective. Those harnessing these advancements are set to have key competitive advantages in the financial services industry in the coming years.
A blockchain is a good approach when you have a complex value chain, with several participants, and your goals are to speed up processes, improve data consistency and strengthen trust. To achieve this, an organization needs an innovative integration platform to help manage data streams in a secure reliable way, where the use of API management and integration solution such as Cloud services could be considered, as this can make participation much easier than traditional, on-premises solutions.
SEEBURGER can help you enable your blockchain initiative to advance your business, through an innovative business integration platform. Learn more: API Lifecycle Management Solutions
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Written by: Ulf PerssonAs SVP, International Field Marketing, Analyst Relations and Business Development, Ulf is responsible for marketing and lead generation, sales and field marketing strategies, customer excellence, analyst relations, business development, management and leadership related to SEEBURGER Integration (technology, platform, solutions, cloud integration services, etc.). He and his team work across multiple industry verticals such as Financial Services, Utilities, Automotive, Logistics, Retail, CPG and Manufacturing. Ulf has more than 30 years of global business and technology experience working with product and solution delivery of integration technologies (EAI, EDI, B2B, MFT, API), Analytics and Big Data, Mobile, Digital Transformation and industry initiatives, both on-premises and in the cloud. Before joining SEEBURGER in October 2016, Ulf worked in various global leadership roles with international business integration technology providers.