How blockchain will revolutionise banking (2024)

Now think of an online version of that ledger that’s instantly accessible by multiple parties – secure, accurate and updated in real-time. It’s called blockchain and it’s bringing fast change to global trade and finance.

Blockchain is revolutionising the speed and efficiency of transactions. While the application of the technology is still in the proof of concept stage, it could play a positive role in a diverse range of industries and sectors including banking, commerce, healthcare, insurance and government.

For one, companies could gain near-instant global access to their funds any time and anywhere; cash could be in continual motion to meet a company’s working capital and liquidity needs worldwide.

Impacts on banking are particularly important, with advances such as real-time settlement capability, reducing counterparty risk and enhanced automation.

“This is revolutionary technology,” says Gautam Jain, ‎ global head of digitisation and client access at Standard Chartered Bank. “What we do with the revolution, the industry is still coming to terms with. Hopefully, organisations will be able to harness the power of this technology for the advancement of the society and community, especially banks to make global trade and financial services much stronger to help connect communities and help our societies grow.”

How blockchain works

So what is a blockchain? Picture a daisy chain, but replace the daisies with blocks that each represent a piece of data. A blockchain is made up of individual blocks of data involving a series of related transactions, linked together in consecutive order.

It allows all parties to share a digital ledger across a computer network without the need for a central authority. A transaction could flow like this:

• A wants to send money to B
• The transaction is represented online as a “block”, a coin or a token in a database
• The block is broadcast to every party in the network
• Those in the network approve the transaction
• After validation, the block is added to the chain, which provides an indelible and transparent record of transactions
• The money moves from A to B.

The promise of blockchain

Blockchain holds the promise of bringing greater efficiency and transparency to the banking industry, for example, allowing cross-border transactions to be made in real-time and money to be exchanged at the speed with which information moves today.

“Banks should be taking a lead in this because if you look at the original purpose of setting up a bank, it was to connect communities together and facilitate trade and commerce. For the first time, you have a tool to do just that on a global scale which is secure and irrefutable,” Jain says.

It also has huge potential implications for global trade and commerce. “If you take trade, largely manual and paper-based, simply because of the number of parties connected to a transaction, if you can take all of the parties into a common infrastructure, you make trade much more efficient. The more efficient global trade gets, the more the communities benefit,” he says. “It is decentralised – no single person owns it. So it is a fantastic collaborative tool.”

Blockchain got its beginnings as the underlying technology behind the virtual currency Bitcoin. It turns out the technology has far greater potential uses.

“That is how interest in blockchain or distributed ledger technology was born, at least in our organisation. We started looking at digital currency and realised the underlying technology is much more interesting. Now people talk about blockchain way more than they talk about Bitcoin, which was the original idea that spawned this,” Jain says.

Jain says that technology is not a business disruptor, but an enabler. “Some of the business models are ripe for disruption, and we should look at the distributed ledger technology or blockchain to see how we can do it.”

Further reading | Banking on innovation

Further reading

Banking on innovation