Improving the banking consumer experience through blockchain technologies
Blockchain technology rose to prominence as the framework that enabled bitcoin to become a virtual alternative to physical currencies around the world. However, it is now bringing innovation well beyond bitcoin and driving important developments in the banking and financial industries. Major financial companies are investing in blockchain in hopes of building innovative banking services and powerful mobile payments solutions as ways of upgrading the consumer experience.
Blockchain functions as a public ledger system, which provides additional security and dependability for payments made through the system. The ledger records and verifies all transactions made through the system, which is how bitcoin became such a successful cryptocurrency. Although it is an unregulated currency, it benefits from highly secure payments systems that surpass even what some financial institutions can offer.
The technology is also highly amenable to international payments and mobile banking, and it doesn’t require third-party assistance to facilitate transactions — another feature that further reduces the risk of a security breach. For banks, though, the most attractive feature is its ability to save billions of dollars in processing costs.
A cost-effective approach to innovation
As Business Insider noted, many major banking institutions are drawn to blockchain’s ability to power more efficient banking practices. There is great financial incentive to do so. Experts estimate that blockchain could save banks up to $20 billion every year in processing costs by 2022. Banks will be able to simplify their payment processing and become more efficient, reducing unnecessary expenses, combating fraud and accelerating the time frames for these transactions.
Blockchain reduces the dependence on paper in these transactions, and it can eliminate complex steps such as remittances and cross-border transfer, securities trading and other measures designed to validate payments, track money movement and regulate cross-border transactions.
Business Insider noted that more than 50 major banking institutions are already collaborating with blockchain startups in hopes of developing products and systems built upon blockchain technology. Some of these banks are part of the nonprofit Hyperledger Project, which is dedicated to supporting blockchain collaboration, and also fund new blockchain projects both in-house and through outside partners.
Improved customer services
As banking products move toward a more mobile-friendly, consumer-centric model, blockchain figures to play a natural role in that evolving relationship. Banks have already made deep investments into mobile payments products and services, which are becoming more central to the consumer payment process. Blockchain pairs nicely with mobile in this regard, as it could provide a valuable framework that improves security and improves efficient operations of these solutions.
Blockchain could also lower the costs and fees handed down to consumers, assuming banks decide to pass on their own savings. Whether that happens remains to be seen, but as banking customers become aware of blockchain’s savings and benefits, they’re more likely to demand those savings translate to a better consumer experience.
Meanwhile, for consumers making international payments, blockchain could open the door to vastly improved transfer options, moving money in ways that are both safer and more cost-effective.
For all the attention bitcoin has received over the years, many experts don’t see the cryptocurrency as a significant innovation that will disrupt the banking industry for years to come. Rather, it’s the blockchain technology that bitcoin is built upon that those banks see as driving future innovation, and financial institutions are committed to using it in their own operations.