How blockchain technology will disrupt the banking industry.
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Banking is a simple business. It provides finance to companies, a safe place for their cash and facilitates payments.

It is the most profitable industry sector by quite a distance even though it does not produce tangible goods. Globally banks generated profits of $920bn in 2013. Yes $920bn PROFIT according to the Financial Times and The Banker Top 1000 World Banks database!

Why are banks so profitable? They hold a unique position. By virtue of their banking licenses they are at the heart of every single business and provide an important platform for global trade. They provide a more convenient alternative to physical cash. They hold the cash on behalf of their customers, effectively borrowing the money to lend on to other customers at a profit. Effectively they provide a market for money.

Banking will be disrupted because it is a really simple business to disrupt. Essentially it is a data business. At the core of banking is money, the value of which is determined by the currency in which it is held. Money is represented in financial systems by data.

There is phenomenal capability and potential for disruption in blockchain technology. One such example is Bitcoin. Even though its brand has been tarnished by scandal it demonstrates that crypto currencies are potentially a robust alternative to traditional currencies. It can provide payments capability at a fraction of the cost of traditional payment methods. It is already disrupting payments but the level of acceptance by businesses is quite small.

The blockchain technology which is behind Bitcoin probably represents the future of banking. Blockchain principles go beyond just currency and can potentially represent an exchange of value of complex bank transactions and other assets like investments and shares.

Let’s go back to the fact that banking is about data that represents money. However this data can corrupted or leaked and has many other flaws and is based on the assumption that you can fully trust the banking system. Blockchain technology offers a comprehensive and flawless solution for banking because it cannot be corrupted or leaked and its integrity is beyond question. This is why many of the largest global banks are exploring how blockchain applications can provide the future platform for banking globally.

Have a look at these links to see how three of the world’s banks are exploring blockchain technology.

Standard Chartered
BNP Paribas