By
Mayowa Adebajo
March 12th, 2024
The conventional approach of financial institutions has been undergoing continuous reform because of the blockchain technology. What is this process: creating of the future or just a popular trend?
Blockchain changes the world every minute. Everybody can witness a digital revolution in the financial sector. For 2 years in a row modern banks and lending institutions have been scratching their heads over the idea of using blockchains in their activities.
The progress has always been inevitable. Basically a project blockchain is the optimization of certain financial chain links (international money transfers, lending or payment processing) and also the profession-oriented services selling to enterprises and banking organizations.
Despite differences, blockchain platforms and banks can benefit mutually from their cooperation. Perhaps in the near future, we will see international expansion in the sector dominated by intelligent fin-tech companies partnering with the banking industry. Clearly, there is plenty of space in the financial services market today for a wide variety of business models and players.
“Edison’s light bulb was not profitable to the oil giants, but now every house has a modified energy-saving light bulb.”
Perspective is Undeniable
A year ago the Bank of England began selecting a team of blockchain specialists among students who were well aware of the specifics of this blockchain. Today the institution continues to hold competitions among gifted students and inspires them to find new ways to solve the problems of the modern financial system with the help of the blockchain technology.
The fin-tech development made the innovative idea of open access to financial data a source of new opportunities for the banking sphere. The British government continues to support fin-tech projects with the hope of turning the country into a world center of financial technologies.
The Government intended to identify the best way to implement a single API standard and to evaluate the usefulness of open banking for a basic user. In recent months, the world has heard official statements from the Bank of England that cryptocurrency and mobile technologies will change the banking system in the coming years. However, England is not the only country to support the blockchain technology at the state level.
Representatives of the Tunisian Ministry of the Digital Economy also sought a specialist in Bitcoin and blockchain, and the renowned French Société Générale bank began searching for a similar genius that would keep abreast of the world of cryptocurrency.
The French decided to create their own cryptocurrency and embed it in the financial system using blockchain technologies. For its part, Tunisia, as the most developed and competitive country in Africa, is trying to keep pace with the development of the financial system.
That is why they look carefully at the shortcomings of the blockchain and its advantages for the private life of the citizens. The fact that they need specialists in blockchain already shows that banks do not want to watch quietly how this technology is capturing the world. They want to be part of this conquest.
Blockchain has also drawn attention of the most influential Russian bank – Sberbank RF, which decided to explore a block system of transactions. It has already made a pilot payment transaction using the blockchain technology and now the management of Sberbank RF demonstrates optimism about future of this innovative approach.
In 2015, the Mellon Bank (New York) began a famous experiment using a special public register, which resembled blockchain because of its block transaction chain. Today it is a part of progressive partnership of the 7 banking institutions creating a platform for syndicated loans based on the blockchain technology.
The Swiss from the Bank of UBS even set up a lab that has been working on the blockchain capabilities for two years now. This project attracted the investors and made possible the establishment of a crypto-bank in Switzerland.
The chain reaction continued with steps of the Estonian LHV bank that created a blockchain-based platform for euro transactions with ChromaWay AB specialists. At the same time, the Bank of Barclays started working with the Safello cryptocurrency to study a blockchain.
Blockchain gained lots of attention with the interest of the SWIFT Institute. Wim Raymaekers, the head of the banking and financial markets department in SWIFT, said that the capacity of the blockchain system was so large that it could be applied not only in the financial sector but also in other segments of the economy where transparency and speed of operations matter.
The company gave a grant to predict how the blockchain would behave in the near future. Experts still believe that the potential of technology has not yet been revealed.
At the same time, Europol continues to recruit a team of cryptocurrency specialists to monitor transactions and to be able to combat the cybercrime. The 2017 Internet Organised Crime Threat Assessment warns the world of the increasing role of cryptocurrencies in cybercrimes. Europol considers Bitcoin-transactions as a form of “open-source” of intelligence, meaning a method of gathering intelligence based on analysis of a wide range of publicly available data.
According to the IBM C-Suite Study, thousands of companies and organizations were interested in the blockchain technology in 2017, with more than 35 per cent of them representing the financial sector.
Why Would Blockchain Necessarily Take a Leading Place in the Financial Sphere?
The complexity of remittances in today’s world is not only a concern of duration, but also of high commissions. Payment for a transaction is often too large. Making a transfer from the United States to the RF or from France to Australia is not a low cost pleasure.
It all depends on the amount of the transfer, but the commission is on average $30-50. And all thanks to the SWIFT, whose safety has long been jeopardized by the scandal of stealing a large sum of money from the Bank of Bangladesh.
In addition, Iran was disconnected from the SWIFT at the time. No one is immune to repeat this scenario on its own example. Blockchain solves these problems through the lowest possible commissions, high speed of transactions and full protection of money.
The full protection of the Bitcoin is proved by thousands of hackers: no one succeed in hacking into the main chain of blocks during more than eight years. It’s not in vain that blockchain is often compared to a safe that’s hard to steal.
As long as banks still spend a lot of money and energy checking customer data, blockchain cares about transaction security only by its existence. Nowadays the technology is as secure as possible. Still lots of promising projects like Gladius are working on making blockchain even safer.
The revolution is made by specially crafted platforms, among which one of the prospects is CREDITS. In particular, the developers of this project took advantage of the Bitcoin and Ethereum technologies, combining them into a single unit.
The new algorithm was able to achieve a huge number of transactions per second with a minimal transaction commission. Up to 1 million transactions per second is likely to be the only market offer in that way. Bitcoin blockchain becomes slower each day, and the ‘weight’ of the blockchain grows predictably. If you have been into blockchain transactions for a few years, you have certainly noticed the speed reduction of transactions.
Financial institutions have already recognized that blockchain can simplify the process of sending and receiving the transmissions. The future of financial technologies has already come. The only question now is: who will participate?