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Here’s how Blockchain is disrupting the banking industry

When disruptive technology emerges, incumbents choose to either resist or adapt, and everyone loves seeing the drama unfold. However, what is initially viewed as “disruption” eventually becomes the industry norm, and traditional functioning becomes obsolete. As technology continues to advance, innovative possibilities continue to accelerate, and industries have to adapt in order to avoid failure and stay competitive. Despite being heavily dependent on technology, banking has experienced lower levels of digital disruption than other industries.

There is however one disruption underway. Blockchain, the distributed ledger technology behind the bitcoin, has the potential to completely revolutionize the way we conduct transactions.

Bitcoin emerged in 2009, stirring up both praise and concern amongst the public. Since its inception, the digital currency has gained substantial traction across the globe, and users have commended the open-source blockchain technology that powers it.

Blockchain technology allows anyone with internet access to utilize a real-time, encrypted, decentralized ledger that guarantees the origin of every transaction. Participants have the ability to transact with one another without authorization from a central authority. Currently, banks control the origin of a transaction through a burdensome and bureaucratic set of back-office procedures. If transactions are in an encrypted digital format and managed by a public ledger, financial assets can be sent transparently and accessed almost instantly. With blockchain technology, clearing and settlement of financial transactions would become redundant, making such transactions faster, cheaper, and more secure.

Global Bitcoin Network with bitcoin currency symbol

Adam Ludwin, CEO of Chain, a blockchain software provider, believes that blockchain technology will replace the way financial institutions currently operate.

Wall Street firms, including Citigroup, Visa, and Fidelity, are already experimenting with the market-wide possibilities of blockchain technology, and many industry leaders believe it will be the next generation database for managing financial assets. Integrating blockchain technology into the banking industry won’t only create change within one organization – it will create change across the entire market. Individuals and businesses everywhere will be able to access a secure decentralized transaction system with no middlemen or central authority looking for a cut. Major players in the banking industry will have to entirely rethink their business models.

What challenges might the banking industry face with integrating blockchain technology? If we are used to relying on a central authority that manages standardization and security, will we be able to trust a decentralized system?

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