The technology behind bitcoin allows transactions to be made reliably and securely, without the need for an intermediary, and provides banks with an opportunity to look for new business opportunities.
Digital transformation is not so much a technological challenge as it is a cultural and organizational challenge. With one exception in the case of the banking sector: the blockchain. These technologies have gone from being virtually ignored to being the focus of the innovation of the big banks. Santander estimates that the use of blockchain technologies can mean a saving of 20 billion dollars for the sector by 2022. And BNP Paribas goes further and dares to compare this invention with that of the steam engine or the combustion engine.
In the United States, a young company called R3 has created a consortium, which has been joined by 25 of the world’s largest banks, in an attempt to define the standards in this field.
From the technology sector, there are also interesting moves in this area, such as the recent partnership between Microsoft and the public blockchain Ethereum. Or the various proofs of concept Visa is working on. Or the recent investments of giants like Google, Yahoo! and LinkedIn in startup of the sector.
WHAT IS THE ‘BLOCKCHAIN’?
It is important to try to understand what blockchain is to understand why it is considered so special. It is the underlying technology of bitcoin, the fashionable criptomoneda. Bitcoin, in and of itself, is interesting, but it is not a major shock to the business model of a financial institution. This is not the case with the technology behind bitcoins transactions.
Basically, the blockchain “allows financial transactions between two participants in a secure, reliable and irreversible way, without the need to use an intermediary to establish a relationship of trust between the parties,” said Grant Thornton. This elimination of intermediaries allows a clear cost savings.
TRANSPARENT AND NOT FALSIFYABLE
The data of the transactions are impossible to falsify once registered. Nor can they be deleted, and the database contains a history of each and every one of the operations since the creation of the blockchain. “The transactions are public but anonymous, you cannot associate with anyone,” says Joaquim Fenoy, director of Bitchain. On the other hand, a blockchain can be public or private. “The level of transparency is maintained, the difference being that only authorized people can access this network,” says Fenoy.
WHY IS IT SO POWERFUL?
If the main intermediary are the banks, where is the business opportunity for these? “This technology is not going to make banks disappear, but will allow them to explore new niches and market areas,” said Grant Thornton’s consulting leader Antonio García-Lozano.
The blockchain allows to register any type of financial transaction, not just money. Here come into play the so-called smart contracts, which open up endless new business opportunities for entities. “By using blockchain as a source of information, these smart contracts can be used to guard assets and ensure neutrality,” said Luis Pastor, senior manager at Grant Thornton Consulting.
You can also register bonds, shares, transfer of properties and any type of right or obligation. Even total or partial securitizations. “We have detected a variety of alternative uses such as the management of clinical records, copyright, payment systems, logistics or crowdfunding. But it is certainly the financial sector that is taking the blockchain initiative and the one that can most benefit from her characterizes.