Top Blockchain Trends in Finance
While blockchain remains one of the most significant uncharted territories of our time, big banks seem to be the most aggressive when it comes to integrating an ancient with an incredibly new idea.
Before 2017, banks couldn't care less about the noise of "decentralize" and the new, "peer-to-peer" transactions that would, unannounced to them, be the landmark of the decade.
But once the market legitimized in value with hundreds of millions USD being raised in short periods of time, banks couldn't resist the temptations that cryptocurrencies brought to the table.
According to KPMG's Pulse of Fintech Q2 report, mostly banks and other firms harnessing the powers of blockchain raised more than $240 MM of venture capital money Q1/Q2 of 2017, including $107m raised by R3, the New York firm owned by 40 of the world's biggest lenders.
Banks are now rushing to conquer the concept before other competition and industries gradually oversaturate the market beyond going back. Although a plethora of industries are taking crypto banking to a whole new level, here are five ways how the leading banking and lending institutions are taking and running with blockchain's new proof-of-concept ventures.
Not only are banks, but many payment institutions such as PayPal are integrating payment systems into running blockchains or even to launch ICOs. While this may not be shortly, most banks are taking at least minor strides to manage and domineer a currency of their own potential.
Here are some of the case-by-case situations of incorporating crypto to into the structure of the bank itself.
Banks such as USAA allows users of Coinbase; a popular cryptocurrency exchange and wallet service for Bitcoin, Ehtereum (Classic), and Litecoin, to view their balances from their apps and have invested in the exchange, marking the first major bank to invest in such an exchange.
Santander; the first U.K. bank to use blockchain to create a new international payments blockchain-integrated payment system, One Pay FX, will first allow customers to transfer money between Santander accounts throughout South America and Europe.
2. Customer Verification
But with the age of privatization, comes one of the riskiest questions for all fintech institutions using blockchain technology. Identity represents one of the several roots that legitimize the industry, as lenders are solely responsible for confirming the validity of each user -- making sure they aren't an illicit actor.
If Banks were to lose ahold of a payment process, a database of information, or user crypto addresses, the blockchain industry in its entirety could lose a massive amount of users, as well as time, money, and a long battle with the federal and many local governments.
Thankfully banks are pretty good at keeping information safe, but now they must work tirelessly to making sure the same thing doesn't happen to one of their millions of users. Big banking institutions could be looking to the blockchain itself to provide a form of identity verification of its own, combining the power of anonymity and public access, a fundamental idea of most, if not all blockchains.
As more and more millionaires arise from the ICOS, coin pumps, and other blockchain-related launches, banks have become more and more envious of the new trading opportunities cryptocurrencies have to offer.
Amber Baldet, formerly an executive at JPMorgan's blockchain unit, said Wall Street will begin the process much "sooner than people probably think." However, she mentioned, "but even where the will is, the legal and regulatory framework is challenging."
Goldman Sachs, another banking giant looking to lead the movement, has become the single biggest company to invest in various blockchain technology, according to CB Insights.
Global trade is more than exchanging goods on an international level-- goods move from one place to another, but they do so through a web of intermediaries.
Exporters, importers, and banks all require checks and verifications at various points along the process, and each part depends on the successful completion of the previous checkpoint.
The application of distributed ledger technology (DLT) in trade finance and supply chain management has for some time been a focus of financial institutions around the world.
Early digital ledgers(DLT) mimicked paper catalogs and was used for similar purposes such as keeping track of money but on a larger, more complex scale.
And while paper-based transactional items remain still hold true: money, seals, written signatures, and bills, but companies look to new fronts in order to lead the movement. While it may take a day to ship a product or good, it may take up to a week just for the paperwork to be completely vetted and cleared.
While the long-term goals of digitizing entire trade industries may take a while, blockchain's promising DL algorithms look promising for those who have tried it. The Indian IT international corporation Infosys is creating a new trade network called India Trade Connect, in which participating private banks from all over India aim to completely digitize trade finance business transactions and processes, as well as delve into other opportunities blockchain might offer with trade financing.