Fintech disruptors powering the banking revolution with behind-the-scenes blockchain infrastructure
Blockchain technology has made a significant impact in the banking world. Top global banks including
The Bank of England, and
Deutsche Bank are among the early adopters of the nascent technology. Banks are increasingly integrating digital assets and blockchain technology into their internal operations to improve services and achieve efficiencies.
However, few have leveraged blockchain technology’s potential for developing customer-facing products to date. Instead, the development of consumer-facing blockchain-powered applications is being led by specialist fintech disruptors—including the US digital
currency exchange Coinbase on the B2C side, and the banking-as-a-service providers Baanx, Contis, and Synapse in the B2B space.
Critically, it is these and other banking-as-a-service disruptors that are providing the technology and services to the financial institutions looking to capitalise on the massive growth of the digital asset space and serve their customers with enhanced
How banks are leveraging blockchain infrastructure
Blockchain and its applications allow transactions to flow faster and more securely than via traditional methods, databases, and technology (such as the financial network SWIFT, which is now decades old). Blockchain infrastructure offers better security,
transparency, trust, programmability, and flexibility as well as significantly lower costs at scale.
Furthermore, shared blockchain “ledgers'' enable banks, financial institutions, and other players to achieve higher security of transaction records. Critically, blockchain-based transactions improve security and lower the possibility of an intruder diverting
payments or capturing and manipulating transaction details.
Blockchain use cases among banks and traditional financial institutions
There are several ways in which banks and financial institutions are using blockchain infrastructure. The two main areas experiencing early adoption are payments and clearance and settlement.
Blockchain infrastructure has helped banks significantly accelerate payment transactions and reduce processing fees. Transacting on the blockchain provides the highest level of security and slashes third-party verification times. Indeed, Spain’s Banco
Santander is currently developing a blockchain-based solution that it expects to reduce costs by up to $20 billion.
Banking-as-a-service providers offer white-label products that harness blockchain infrastructure and digital assets to deliver several ground-breaking customer-facing products. For example,
Baanx's TextBit can “send cash or digital assets/crypto” to anyone with a mobile phone number using interbank transfer rates and saving customers from paying higher fees elsewhere.
Clearance and settlement
Blockchain infrastructure can be used to settle transactions securely and transparently. JPMorgan and
HSBC are the latest to join a growing list of traditional financial players using blockchain applications for this purpose.
Blockchain-based clearance and settlement processes save time, cost, and allow banks to reduce back-office staff significantly. The technology-focused stock exchange NASDAQ OMX Group Inc. (NDAQ) has
said as much as it works with blockchain-powered applications to "reduce the time, costs, and points of friction across the capital markets."
Leveraging blockchain infrastructure to benefit organisations and consumers
Fintech disruptors with specialist blockchain infrastructure and digital asset experience are a rapidly growing segment of the payment and financial services world. With over 60 per cent CAGR, they are
expected to reach £40bn by 2025. At this rate of growth—coupled with the innovation of new products and services—the global blockchain market is set to birth a host of new blockchain infrastructure and digital asset fintech disruptors that will fold into
the mainstream financial system in the near future.
Financial institutions—including traditional banks, payment companies, e-commerce merchants, FX providers, exchanges, neo-banks, and even SMEs—are exploring the advantages of the digital asset space in 2021. Blockchain infrastructure providers, together
with traditional players, are now offering digital asset-based products and services.
Furthermore, blockchain technology—coupled with AI transaction monitoring and products like 3D secure—ensures high security and reduces both transaction cost and fraud. The B2B banking-as-a-service providers (such as the above) use blockchain infrastructure
together with artificial intelligence to deliver quick and efficient financial services to businesses. The result is a host of product offerings, including crypto friendly debit cards and wallets, as well as payment gateways for exchanges, wallet providers,
and e-commerce merchants.