We never stop hearing, especially in the past few weeks of great Bitcoin excitement, that its enabling blockchain technology is going to be a revolution. But the reality is that the revolution has already arrived, simply that in the near term no ‘killer app’ has emerged offering fundamental and permanent change in financial services beyond cryptocurrencies.
In fact, in order to understand blockchain’s progress to date, it is indeed useful to start talking about Bitcoin, which had already surpassed 400,000 transactions per day by the beginning of December 2017. This now-well-known instrument, that first arrived on the scene in 2009, is often criticized for its inability to emulate current payments networks and comply with the requirements of the financial systems and governments. However, Bitcoin offers advantages such as allowing the transfer of value through secure transactions avoiding financial intermediaries and their higher intermediation costs.
The rapid growth of this type of transaction is helping to demystify technology and increase its reputation as a reliable and essential new technology, and raises the hope for an appropriate regulatory framework, and the approval by the monetary authorities for a wider range of economic transactions.
Perhaps it poses a contradiction, however this technology that everyone believes will make financial intermediaries dispensable in the future, may also contribute to benefit banks, increasing the transparency, security and control of the data.
But what are the areas where blockchain can bring financial institutions more value?
Within the usual bank debit and credit operations, the use of simultaneous transfers, both securities and payments, reduces the complexity of funds transmission and reconciliation. In addition, these steps can be further automated to convert existing contracts into smart contracts. New contracts are even easier to create, yielding time and cost savings not only for banks but their customers by lowering incremental costs at each transaction step. Added to the benefits is that in deploying blockchain, banks gain a faster path to acquiring and getting to know their customers.
Insurers can similarly reap benefits from blockchain: faster processes and execution of payments, reducing the required documentation and forms to be completed, as well as reduced need for back-and-forth in claims processing are some of the main advantages worth mentioning.
In short, blockchain is here to stay. Its applications in different financial sectors never cease to grow and in the future will revolutionize the way of doing business in many markets by leveraging its advantages and bringing about a suitable regulatory framework. But no one should think that this will leave the current players in financial services out of the game: banks continue to have broad power and responsibility, and will also make use of blockchain technology to continue growing and increasing efficiency.
A version of this article was published in Cinco Dias.