One of the most intriguing use cases for blockchain is the role it can play in disrupting the financial services industry. Of all the potential use cases for blockchain, financial services are the first and most enduring industry to be disrupted by distributed ledgers and the immutability of transactions.
The financial services industry is, after all, ripe for disruption. Legacy banks weighed down by reams of legislation and outdated data storage architecture are feeling the pinch from upstart fintechs, agile technology companies that have been carving out portions of the consumer financial market - and disintermediating banks in the process - with mobile-friendly, customer-centric applications built on powerful new technology like AI machine learning engines and distributed ledgers.
Blockchain, when stripped to its core value proposition, is a data management system with increased security and scalability than previous models. It is itself a disruptive technology that promises to help legacy banks better serve their digital customers. While regulatory pressure and outdated data architecture are inhibitors to banks innovating, the maturation of cloud technology has finally made it cost-effective for legacy banks to access and leverage new technologies like blockchain. The reduced cost of technological innovation coupled with the digitization of data (as evidenced by the changing needs of consumers) are innervating forces pushing banks to explore the potential of blockchain across the banking supply chain and within every banking channel. Here are three interesting blockchain use cases that illustrate how financial services companies are integrating blockchain to speed up their back-end:
Blockchain Use Cases in the Financial Services Industry
Wells Fargo. Wells Fargo is particularly interested in the securitized home mortgage use case. This has traditionally been quite a cumbersome area for banks and an array of digital-first fintechs have found success disintermediating them by offering better rates and faster pre-approvals. An early member of the R3 Consortium, which is dedicated to building technologies for the future of business transactions on the blockchain, Wells Fargo is well-placed to keep their existing customer base and serve them better through faster, more accurate data management.
Bank of America. One of America’s most popular banks happens to be the bank with the worlds most blockchain patents. While one of the goals is to automate the credit system on an Ethereum blockchain, it is clear that BOA is exploring every functional area of the bank and looking to see which products either A) prove substantial savings in operational cost B) replace loads of technical debt C) best suite their customers going forward. It is a full digitization play looking at efficiencies across the banking stack.
JPMorgan Chase & Co. Another American financial giant has been investing in blockchain for years already. JPMorgan Chase and Co’s research and testing spans many channels of the banking sector, including the expansion of blockchain knowledge and integration across the entire industry in the form of Quorum (an “enterprise-version of Ethereum”) and Interbank (a blockchain-based payment project designed to “speed up the exceptions process” with over 70 other banks signed on).
Many Use Cases, Plenty of Inefficiencies
The plethora of use cases indicates that inefficiencies have run rampant in the banking sector for decades. The physical branch model is falling away as fintechs and future-looking banks are leveraging blockchain technology to meet the needs of today's mobile-first customers. And increasingly, banks are realizing that to craft the most effective blockchain products means connecting with product development and design solutions companies that have the expertise needed to build future-proof applications.
Manju Mohan is the author of this article.
anju Mohan has a background in computer science, economics, instructional design, and UX design. She is the CEO and Co-Founder of Ionixx Technologies – a design, web, mobile and blockchain technologies service provider.