How Blockchain will change the Banking Industry


The banking industry is probably one of the first sectors that blockchain will transform.  With all the potential that it offers, the banking system is susceptible to getting overthrown. 

Harvard Business Review mentioned that the blockchain will do to the banks what the Internet did to media. The two major reasons why blockchain can change the banking system is because the transaction and verification fees are much lower, which makes the transactions cheaper and faster.


There are three different forces putting pressure on the banks that lowers their efficency and raises their costs. They are the digital disruption, historical low interest rates and a variable legislative environment. Every year, 150 to 300 trillion dollars is sent from businesses for payments across national border and the transaction fees average 10%, which is a lot of money. To keep up with KYC regulations, banks are spending between 60 to 500 million dollars, this is a lot compared to what blockchains can do. Blockchains can be more efficient than banks. For example, blockchain technology would remove any overhead costs for customer identification. A report by the PWC explains it clearly:

“Blockchain systems could be far cheaper than existing platforms because they remove an entire layer of overhead dedicated to confirming authenticity. In a distributed ledger system, confirmation is effectively performed by everyone on the network, simultaneously. This so-called ‘consensus’ process reduces the need for existing intermediaries who touch the transaction and extract a toll in the process. In financial services, that includes those who move money, adjudicate contracts, tax transactions, store information and so on.”

About KYC regulations an Accenture representative mentioned: “We think identity could be big. We can easily see how you could move [Blockchain] to the massive area of ‘know your client’ and anti-money laundering, where the costs are huge for banks and the costs of messing it up are also huge.”

In 2017, identity frauds cost over 16 billion dollars, so with the help of blockchains, a lot of money could be saved. When we get used to a model, for instance, the banking system, it is easier to trust the initial system than to open yourself to a new technology. To save tremendous amounts of money, banks have to deal with blockchain technology if they don’t want them to burn the system already in place.


If you are shipping oil from Jakarta to Malaysia it will take approximately a week for the paperwork to be received and about a day for the oil to travel from Jakarta to Malaysia.  This example shows a weakness of the banks that blockchain technology can disrupt. Charley Cooper, a managing director of R3 once said:

” Trade finance is an obvious area for blockchain technology. It is so old it’s done with fax machines and you need a physical stamp on a piece of paper.”

The banking system is a place that needs to have better technologies such as blockchain technology with its remarkable advantages.

SAP, ATB Financial and Ripple collaborated to send the first ever blockchain payment from Alberta, Canada to ReiseBank, in Germany. According to Digitalist Magazine:

“The CAD 1000 (€667 EUR) blockchain payment, which would typically have taken from two to six business days to process was completed in about 20 seconds. The proof of concept has since been enhanced, and we are able to complete the transactions in just 10 seconds.”

The blockchain technology can speed up the transaction course locally and across borders. Also, it can help the banks to save millions of dollars. Presently, many banks are investing in blockchain technology  because it has much faster transactions and is more efficient than what is currently in place in the financial system. We are moving into a new era where many olygopolies will have some serious competition.



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