Blockchain/distributed ledgers provide the potential efficiency of a central database and the robustness of a third-party clearing house for complex/distributed transactions without costly middleware.
FIVE WAYS BANKS USE BLOCKCHAIN
1. Clearing and Settlement
It is not the most exciting area of banking, but the tangled web that records loans and securities costs investment banks billions of dollars to run.
2. Payments
Central banks across the world are exploring the potential for shifting parts of their payments systems on to blockchain technology or even using it to launch digital currencies.
Commercial banks, meanwhile, are growing tired of waiting for central bankers to take the lead and are pressing on with their own projects.
In the field of cross-border payments there is an increasingly bitter tussle under way.
3. Trade finance
Trade finance is still mostly based on paper, such as bills of lading or letters of credit, being sent by fax or post around the world, and seems to many bankers to be crying out for modernization. Many believe that blockchain is the obvious solution especially as numerous parties need access to the same information.
4. Identity
Verification of customers and counterparties is a vital for banking. Without it, lenders would quickly lose their roles as trusted guardians of people's money. Banks have been trying for years to set up a shared digital utility to record customers' identities and keep them updated. They have failed to find the right formula, undone by conflicting demands and the problem of deciding liability.
5. Syndicated loans
When a US company raises money via a syndicated loan it takes on average 19 days for the transaction to be settled by the banks. When a loan changes hands between banks or a borrower repays a loan early, much of the communication is still done by fax.
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