Retail banking continues to tread with caution before adopting blockchain, and it is Bitcoin’s 2017 rise and fall scenario which drives the distrust according to a recent report.
The potential of blockchain is being missed according to an earlier report which claims that Bitcoin lost its credibility with banks after its rise and fall in 2017. The possibility of using blockchain technology for cross border payments, saving banks as much as USD 4 billion a year, is still being overlooked due to lingering concerns over Bitcoin’s stability.
That report also points to further savings of USD 9 billion annually due to blockchain implementation cutting down on fraud. However, the poor uptake of blockchain in the banking sector is not reflected elsewhere, with governments seemingly taking blockchain on board with great vigor and enthusiasm.
Another consideration for the banking community is regulation, according to a McKinsey report. Although G20 nations are currently attempting to forge agreements spanning international borders when it comes to blockchain and cryptocurrency, there is clearly still much to do, with the UK’s Financial Conduct Authority still yet to release its awaited conclusive report on cryptocurrency and the SEC continuing to stall on ETFs.
The report also highlights some of the practical challenges which banks will be forced to address using DLT, particularly those of security, also citing other considerations which banks will need to address in adopting blockchain such as competitiveness:
“Banks must create large networks to achieve benefits at scale, requiring data standardization and collaboration. Finally, there is the question of whether any bank would be willing to take the lead on creating a utility that offers no competitive advantage—the so-called coopetition paradox.”
A University lecturer in Switzerland Matthias Weissl has recently suggested traditional banks are being easy prey for fintech companies, by being slow and unhelpful in crucial financial services such as settlement times, access and adoption of change. Clearly, the scope for change is there if banks can remove memories of Bitcoin’s rise and fall from traditional banking’s collective psyche and look at Blockchain for what it can offer, not its associations and origins which banks clearly distrust.
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