Large financial transactions have been virtual for a long time, moving around the world via banking and corporate systems and often tallied up in spreadsheets. Now, however, we are seeing how everyday money and currencies are going digital with the rise of cryptocurrencies such as Bitcoin as an alternative to ‘hard cash’. Based upon Blockchain technology, the benefits of Bitcoin within the banking industry are already becoming evident; in fact, a recent Santander report suggests that “distributed ledger technology could reduce banks’ infrastructure costs attributable to cross-border payments, securities trading and regulatory compliance by between $15-20 billion per annum by 2022.”
Blockchain, whilst still in relative infancy as a technology, has the potential to transform centuries-old mechanisms for transferring money. Our most recent research, which surveyed over 300 banking executives on the current payments landscape across Europe, found that cryptocurrencies and Blockchain technologies are now seen as real drivers for change.
The future
The advantages of Blockchain are not only in its functionality, but also in its secure and resilient architecture, protecting against some very powerful attacks, both actual and theoretical. Crucially, it offers the promise of addressing some of the key challenges experienced in the financial sector for many years. Beyond the security implications and increased transparency of transactions for all parties involved, it can have a beneficial impact on pricing and costs in the market, along with the opportunity for more accurate tracking of customer payment histories, across borders and banks, reducing the risk of defaulters. For example, the Monetary Authority of Singapore has funded a blockchain-based record keeping system as its Managing Director, Ravi Menon, heralded the technology for allowing “greater resilience against system failure.”
The ‘Blocks’ in the road
However, if a fraudster wants to make any change to the distributed ledger, it cannot be done unless the fraudster also controls 51 percent or more of the participants on the network, which is next to impossible in the case of any large network.
While the current risks need to be addressed, many organisations are taking notice of Blockchain as a potential game-changer. Whatever the outcome, there is no doubt that the face of finance will soon look very different.
Tony Virdi, VP and head of banking & financial services in the UK & Ireland, Cognizant
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