Blockchain is an open decentralized database. It’s the underlying technology for the popular cryptocurrency, Bitcoin. Now, banks and other financial institutions want to apply it to financial transactions. The recently launched IBM Blockchain platform, LedgerConnect is aimed at the financial industry and banking sectors.
IBM, with CLS, a foreign exchange financial group, launched LedgerConnect a week ago. It is a proof of concept blockchain platform designed for companies that provide financial services. Its aim is to apply blockchain technology to a number of challenge areas that are currently not that fast. They also have challenges like tracking a paperwork trail, know your customer (KYC) processes, collateral management, and trades.
So far, nine financial companies, including banks like Barclays and Citi, are involved in the trials.
With everything being online, delays will likely be reduced by a large margin.
According to an IBM report:
“With IBM Blockchain, banks can create secure, low-cost and high volume cross-border payments without sacrificing margins.”
The IBM website states that 91% of banks are investing in blockchain solutions by 2018. Also, 66% of institutions expect to be in production and running at scale with blockchain. All the transactions being on the same network makes everything much easier.
An added advantage is that blockchain is known to be tamper-proof. So the overall security and speed will increase a lot. While the blockchain used in Bitcoin is public, the one used in large companies would be private. Makes sense as you wouldn’t want everyone’s banking and transaction info publically available everywhere. To further understand why blockchains are great for banking applications, read our article, 15 ways to make Blockchains scalable, secure and safe!.
In the current day, banks work with manual transactions and a considerable amount of paperwork. So transactions like trades and loans take a lot of time, amounting to delays. Cross-border payments are costly and time-consuming. Moreover, making customers provide identification frequently is tedious and decreases customer satisfaction.
IBM blockchain aims to address all these pain areas. As the platform is online, blockchain based smart-contracts automatically store information about the transactions in real-time. As a result, there won’t be discrepancies in the data shown in different locations. Transactions on blockchain are identified uniquely with a hash. KYC info will also be more secure since it will be stored in the blockchain that is known for being tamper-proof.
Source: IBM infographic
Source: IBM infographic
LedgerConnect tries to create a network of multiple providers that can provide their applications to be deployed on this platform. Large banks and organizations can come and use those applications creating an app store like ecosystem. The applications in the LedgerConnect “store” are built on Hyperledger Fabric. This project is expected to launch in early 2019 but needs approvals from central banks. To know more about Hyperledger, take a look at our article Hyperledger: The Enterprise-ready Blockchain
Implementing blockchain in finance and banking will enable simplicity and operational efficiency while also enhancing the end customer experience. Many of the current challenges can be solved and the time involved can be brought down to minutes from hours. To know more visit the IBM website.
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