Blockchain is already having an impact on banking

Many leading financial institutions are investing time and money to explore how the core capabilities of blockchain can improve how banking works in the near future. It is no wonder that blockchain is one of the most discussed topics in the financial services industry today.
Blockchain is based on a shared digital ledger that in effect decentralizes trust and dispenses with the need for many intermediaries. It relies on consensus among a peer-to-peer network of computers that is secured using complex algorithms. Blockchain-based financial applications and transactions don’t use a centralized platform or authority to perform validation.
Advocates for blockchain in financial services claim it has the potential to reduce transaction processing times and slash fees.
Many banks are experimenting with the same distributed ledger approach that blockchain is built on. They see it as having potential, for example, to improve the efficiency of post-trade settlement and cross-border payments for trade finance, reduce data storage costs and minimize data duplication. Blockchain promises to enhance data security via its decentralized public record that stores details of every transaction and performs continuous verification.
IBM announced in June 2017 that it is building blockchain technology that will be used by seven of Europe's largest banks, including HSBC and Rabobank, to facilitate international trade for small and medium-size enterprises. The project marked an important real-world use case of blockchain technology in financial institutions.
Also, a consortium of European banks including Deutsche Bank, Société Générale and Santander has come together that has branded itself as we.trade. Its goal is to simplify cross-border commerce in European countries with the help of a massive blockchain. The eight banks in the consortium will manage the software and its distribution, which they expect to roll out by the middle of 2018. Over time, the consortium is expected to grow to include additional banks from other countries as well as trading partners such as shippers, freight forwarders and credit agencies.
Through the we.trade platform, European distributors and manufacturers will be able to coordinate their deliveries and invoices more efficiently by working with their banks through an online platform.
Most smart banks will see the opportunities that blockchain offers for innovation within the parameters of the existing system. They are building proofs of concept to assess the regulatory and data security implications.
Banks interested in incorporating blockchain-based innovation need to consider a long-term strategy to explore the possibility of migrating from their legacy centralized model toward more fully distributed digital processing.
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