Is your bank about to join the blockchain revolution?

You don’t have to go back too far to remember when Bitcoin was a non-starter for many finance institutions. They classed the Internet currency as a fad and held no stock in its future.

It’s much different today. Bitcoin has a very real Forex rate against the pound, currently around the £1.50 mark per Bitcoin owned. Don’t be surprised if ownership of the virtual cash becomes yet more prized (thus, worth more) soon. Here’s why:

The rise and rise of blockchain tech

In Spring this year, Rhom Ram reports a sudden increase of interest in Bitcoin at Deutsche Bank. Or at least the technology upon which the currency is built.

After months of “talking to [him]self within the banking community”, blockchain technology became the buzzword in world banking. All of a sudden, this previously-ignored bit of a coin was a huge player.

Earlier this year, nine banks and Wall Street high flyers joined the R3 consortium. The group is headed up by David Rutter, a whiz on the tech trading floor himself for many years. He and many other interested parties are looking into using blockchain as the sea upon which stock markets float.

Two days ago, Reuters announced that thirteen more of the world’s biggest banks had joined the blockchain party.

Moreover, we learn that Deutsche Bank has already begun trials testing the technology to trigger and activate bonds. The tests won’t end there.

What’s this got to do with Business Banking?

Blockchain’s use could well extend beyond the markets and for bonds. Banks are looking into the technology as it could provide a huge, decentralised ledger. They could then put this to work for everyday banking transactions.

There’d need to be modifications to the current system to enable mass implementation. The Bitcoin currency it currently supports is 100% visible to the public. Neither personal nor business customers would want their records on public display.

Blockchain may, however, make things easier for HMRC. In theory, they could trace ‘owned’ funds across the global network. Laundering and tax evasion investigators could also benefit in the long run.

But what blockchaining could bring to day-to-day banking is a generic system upon which the whole financial platform could run. Banks would no longer have to rely on their own bespoke IT systems. Instead, all transactions could execute with the same universal programming.

Secure network, securing the future

This does, of course, raise an issue of security. But the power behind Bitcoin lies in multiple servers. There are many, spread across the globe (as are the banks interested in blockchain) and are integrated.

Anyone wanting to tamper with the system would have to go to excessive lengths. They’d need to break into all of these servers for their hacking to have any effect. Not implausible, but highly unlikely.

The benefit for banks is cost, cutting down on inefficiency. No more creating massive mainframes that fail at the most inopportune moments. Algorithms could process all manner of transactions and work across the banking spectrum.

Blockchain could also simplify the process for the customer switching business bank accounts. No more getting used to the way one bank displays your data compared to another. In essence, all online accounts would be running on the same rails. So it is “win-win”.

Could the culmination of this technology mean better digital products, service and lower banking costs in the future? One step at a time, eh?

© 2022 All rights reserved. Reproduction in whole or in part without permission is prohibited. See our copyright notice.