If you follow payments and financial technology news, you may have heard the word “Blockchain” popping up more and more over the past little while.
Blockchain is the technology behind Bitcoin and is an unalterable public ledger of all transactions that have been ever been executed using the digital currency. The “blocks” are added in a continuous, ever-growing chain each time a transaction happens. The network is open and decentralized, meaning there is no single “official” copy of the records. It is this transparency that makes the transaction secure without the need for third-party verification.
For more on Blockchain technology check out this TED Talk by Don Tapscott:
Reuters reports that the adoption of Blockchain technology is happening much faster than anticipated, with 65% of banks planning to have Blockchain projects in production within the next three years. To date, about US $1 billion has been invested in Blockchain projects by various financial institutions around the world. Notably, Microsoft and Bank of American Merrill Lynch announced that they are partnering on a major Blockchain R&D project just last week.
Banks are interested in Blockchain because it can speed up financial transaction times. It is also anticipated to make international money transfers much quicker and cheaper. Writes Howard Yu in Fortune, “Just by eliminating the manual processes around reconciliation with customers, trading partners, and securities exchanges, it has been estimated that blockchain will deliver savings of nearly $20 billion per year by 2022—net profit straight to the bottom line.”
While this sounds like good news for consumers, like all disruptive technologies, widespread adoption of Blockchain will change more than fees. Some estimates predict that the banking sector could shed 2 million jobs due to financial technology innovations like Blockchain over the next decade. Indeed, this decline in employment opportunities in the financial sector is already well underway, with 100,000 banking jobs lost in 2015.
While there is still a long way to go for international banks to fully adopt Blockchain into their processing, it seems evident that the technology is poised to become increasingly relevant over the coming years.