Blockchain Can Reduce Costs For Banks
According to a recent study by major global consulting firm Bain & Company, blockchain technology has the potential to revolutionize banking industry. According to Bain & Company, transaction banking revenues are less volatile than other kinds of banking revenues. Banks can also cross-sell the products which are critical to their client loyalty. In the study, Bain & Company has concluded that transaction banking will change the sustainability in the banking industry in near future with the use of Distributed Ledger Technologies (DLT), like blockchain. When banks will use this technology execution, clearing, and settlement will occur simultaneously which will minimize the credit risk and liquidity. New technology has also become a threat to custody and other post-trade security services.
With the help of blockchain technology, the operating cost of trade finance will reduce by 50% to 80% if the technology is used in the right way by the banking industry in the trading ecosystem. The cost will be reduced because of a significant increase in the processing speed. With blockchain technology, all kinds of transactions, including settlement, billing, and payments will be three to four time faster.
Dr Christian Graf, the bank expert and partner of Bain & Company said in a press release that banks are facing a similar upheaval to what the telecommunication industry has been facing for over a decade. According to Graf, a small scale, purely transaction driven fee structure will be replaced by flat fees in the near future for the provision of comprehensive solutions. The banks who will implement the technology early will take the first mover advantage and stay ahead in the competition.
Hypothekar Bank has become the first bank in Switzerland to provide business accounts to blockchain and cryptocurrency companies. At the 2018 G20 Global Finance Stability Conference in Seoul Bank of Canada’s fund management and banking department has questioned the effectiveness and security of using blockchain in the banking industry.