Schlagwort: Internet

Whilst block­chain is one of the most dis­cus­sed deve­lo­p­ments in the finan­cial indus­try, Ger­man finan­cial ser­vice pro­vi­ders have so far ten­ded to wait and see – they see no reason to rush. For many finan­cial ser­vice pro­vi­ders, the tech­no­lo­gy is being con­side­red as part of their stra­te­gic plan­ning and has alre­a­dy been tes­ted sel­ec­tively – and yet, only a few are true block­chain pio­neers. Con­side­ring the major chan­ges in other indus­tries, howe­ver, it is worth taking a clo­ser look at pos­si­ble deve­lo­p­ments in the finan­cial ser­vices sector.

What are the opportunities for financial institutions?

A decisi­ve advan­ta­ge of block­chain tech­no­lo­gy is that infor­ma­ti­on and pro­ces­ses can be exch­an­ged in real-time wit­hout a cen­tral con­trol body in a trans­pa­rent, ful­ly traceable and thus almost for­gery-pro­of man­ner. With the pos­si­bi­li­ty of con­clu­ding secu­re, self-moni­to­ring and long-distance con­tracts, block­chain can save time and tran­sac­tion cos­ts in a wide varie­ty of areas.

Let’s look at some busi­ness models and lines of business:

Figu­re 1: The dis­rup­ti­ve poten­ti­al of block­chain technology

What is the disruptive potential of blockchain in the banking industry?

Ban­king tran­sac­tions should ide­al­ly be simp­le, fast and cheap, avo­i­ding the use of inter­me­dia­ries; the Inter­net of Things (IoT), block­chain-tech­no­lo­gy, cryp­to­cur­ren­ci­es, cloud-com­pu­ting and Web 3.0 with less cen­tra­li­zed inter­net and more peer-to-peer inter­ac­tions will have huge influen­ces on future finan­cial sec­tor busi­ness models.

But in this artic­le, let’s focus on block­chain technology.

To under­stand pos­si­ble advan­ta­ges of this new tech­no­lo­gy, it is important to ana­ly­ze dif­fe­rent busi­ness models.

Tra­di­tio­nal ban­king: First­ly, the­re are some serious poten­ti­al chan­ges for com­mer­cial ban­king. Bank depo­sits will decrease, as the popu­la­ri­ty of alter­na­ti­ve ways to store funds increa­ses. A lot of unban­ked peo­p­le have with block­chain a very real pos­si­bi­li­ty to be part of the finan­cial busi­ness world. Fur­ther, we see a gro­wing demand for new asset clas­ses like cryp­to­cur­ren­ci­es (BTC etc.) from count­ries deal­ing with hyper­in­fla­ti­on. Tran­sac­tions have the poten­ti­al to be much fas­ter and che­a­per than with tra­di­tio­nal pay­ment sys­tems – and inno­va­ti­ve solu­ti­ons such as block­chain can impro­ve this even fur­ther. Banks risk losing busi­ness when decen­tra­li­zed digi­tal cur­ren­ci­es beco­me more wide­spread as methods for pay­ments and of sto­ring money.

Invest­ment ban­king also faces far-rea­ching chan­ges. Equi­ties and debt secu­ri­ties can be repre­sen­ted by tokens on the block­chain in the capi­tal mar­ket and smart con­tract plat­forms allow inves­tors to track and trans­fer bonds in real time. Migra­ting finan­cial mar­kets onto the block­chain, with its more effi­ci­ent infra­struc­tu­re, also pro­mi­ses many more advan­ta­ges that banks should be careful not to miss out on; glo­bal capi­tal mar­kets are moving to the block­chain – Lon­don Stock Exch­an­ge with IBM, Aus­tra­lia Secu­ri­ty Exch­an­ge and Nasdaq for exam­p­le, have all deve­lo­ped block­chain plat­forms for issuing, tra­ding, clea­ring and the sett­le­ment of shares. Block­chain tech­no­lo­gy pro­mo­tes data con­sis­ten­cy, accu­ra­te and immu­ta­ble records of his­to­ri­cal owner­ship, decen­tra­liza­ti­on, and trans­pa­ren­cy. It can be exten­ded to any type of finan­cial instru­ment used for rai­sing capi­tal. This new tech­no­lo­gy is also inte­res­t­ing for asset mana­gers loo­king for an edge in hand­ling their cli­ents’ funds. Insti­tu­tio­nal and retail inves­tors are also show­ing increased inte­rest; across all aspects of the finan­cial sec­tor – and inde­ed across many indus­tries – block­chain and cryp­to­cur­ren­ci­es will play an incre­asing­ly important role as we move in pro­mi­sing new directions.

Insu­r­ers have been slow in cat­ching up with tech­no­lo­gi­cal inno­va­tions – it is a high­ly spe­cia­li­zed busi­ness with careful­ly cal­cu­la­ted risk assess­ments and simi­lar risk pro­fil­ing. It is dif­fi­cult to sell insu­rance con­tracts in a decen­tra­li­zed peer-to-peer mar­ket. Despi­te this, the block­chain tech­no­lo­gy can be a major source of effi­ci­en­cy and inno­va­ti­on for insu­r­ers: shorter wai­ting times, less uncer­tain­ty, fewer veri­fi­ca­ti­on errors, lower back-office cos­ts and the reduc­tion of bureau­cra­cy are all bene­fits that are pro­mi­sed by the new tech­no­lo­gy. But the­se are not the only advan­ta­ges: auto­ma­ti­on of pay-off exe­cu­ti­on pro­ces­ses, grea­ter effi­ci­en­cy in time and man­power and impro­ved cus­to­mer rela­ti­onships are all also made pos­si­ble through the blockchain.

Trade finan­ce: Trade finan­ce is a leng­thy pro­cess invol­ving mul­ti­ple par­ti­ci­pan­ts; the­re are still lots of manu­al IT pro­ces­ses and paper­work.  Such manu­al pro­ces­ses are expen­si­ve and requi­re con­sidera­ble time. Block­chain-based plat­forms are set to rewire the pro­ces­ses behind trade finan­ce. The rele­vant block­chain plat­forms are a type of shared dis­tri­bu­ted led­ger on which the histo­ry of tran­sac­tions is digi­tal­ly recor­ded and cryp­to­gra­phi­cal­ly secu­red. Within trade finan­ce, this tech­no­lo­gy is seen to stream­li­ne the trans­fer of money and goods by faci­li­ta­ting grea­ter trans­pa­ren­cy among par­ti­ci­pan­ts and increase effi­ci­en­cy in finan­cial tran­sac­tions. Block­chain dis­rupts cur­rent pro­ces­ses by offe­ring grea­ter effi­ci­en­cy, bet­ter eco­no­mic growth, and eco­no­mic sti­mu­la­ti­on – it is fas­ter and che­a­per for all par­ti­ci­pan­ts. What’s more, when a trade finan­ce plat­form is built on block­chain, the docu­men­ta­ti­on – for exam­p­le – can be shared across the par­ti­ci­pan­ts invol­ved. This means that ever­y­bo­dy has all the infor­ma­ti­on they need to do their due dili­gence and to com­ple­te the tran­sac­tion, see­ing the same facts and rele­vant infor­ma­ti­on as all the other par­ties, great­ly redu­cing the poten­ti­al for dis­pu­tes; human error is fur­ther redu­ced as pay­ments are auto­ma­ti­cal­ly trig­ge­red by spe­ci­fic events in the sup­p­ly chain befo­re being immu­ta­b­ly recor­ded on the blockchain.

Figu­re 2: Chan­ge poten­ti­al accor­ding to bank products

What are the banking business lines that could be disrupted by blockchain?

Inter­na­tio­nal Tran­sac­tions: Bank trans­fers today are gene­ral­ly com­pli­ca­ted and expen­si­ve. Cryp­to­cur­ren­ci­es will likely beco­me the first choice for inter­na­tio­nal bank trans­fers. They are likely to be fast with lower fees for peer-to-peer tran­sac­tions. The­r­e­fo­re, block­chain looks set to an ide­al  solu­ti­on for inter­na­tio­nal money trans­fers. Some banks are working on pro­of-of-con­cept bor­der pay­ments with a Hyper­led­ger Fabric block­chain plat­form. This will have to be  recon­ci­led with SWIFT in real-time.

The Future of len­ding: Banks are today the pri­ma­ry source for len­ding money. With smart con­tracts based on the block­chain len­ding direct­ly from depo­si­tor to bor­rower is pos­si­ble. Smart con­tracts will make peer-to-peer len­ding easier and more trans­pa­rent. With blockchain’s tran­sac­tion histo­ry it can be seen, for exam­p­le, who is a repu­ta­ble bor­rower. Pre­vious actions will be recor­ded on the block­chain, much like on many exis­ting online mar­ket­places. This redu­ces infor­ma­tio­nal asym­me­tries bet­ween the invol­ved par­ties. Len­ding on block­chain is also set to be less expen­si­ve and fas­ter, as well as being immu­ta­ble and easi­ly accessible.

Escrow ser­vices: Here, block­chain gua­ran­tees that two par­ties in a busi­ness tran­sac­tion can trust each other and that the bank gua­ran­te­e­ing it recei­ves fees of about 1%. Such a deal could be desi­gned with a smart con­tract and then be exe­cu­ted automatically.

KYC (Know your cus­to­mer): Relia­ble iden­ti­fi­ca­ti­on is essen­ti­al to pre­ven­ting cri­mes and money laun­de­ring. The cus­to­mer enters his or her data only once in a coun­try­wi­de ID-Sys­tem on block­chain. This plat­form is immu­ta­ble, secu­re and unbi­a­sed. Fur­ther­mo­re, a Hyper­led­ger basis offers addi­tio­nal solu­ti­ons for iden­ti­ty verification.

Post-trade sett­le­ment: Banks can redu­ce their pro­ces­sing cos­ts, increase tran­sac­tion speed and redu­ce tech­ni­cal over­heads using block­chain. It also redu­ces sett­le­ment times, gua­ran­tees cer­tain­ty of results, gene­ra­tes fewer mecha­ni­cal errors, and has a lea­ner back-office struc­tu­re. Fur­ther bene­fits include that all part­ners use the same auto­ma­tic tra­ding sys­tem, and the audit requi­re­ments are com­pli­ed with.

The­re are, howe­ver, cer­tain­ly many more pos­si­bi­li­ties that will be ope­ned up as block­chain tech­no­lo­gy develops.

Conclusion: Is blockchain the future?

Block­chain tech­no­lo­gy is alre­a­dy firm­ly estab­lished within the cryptocurrency’s envi­ron­ment. The­re are many block­chain initia­ti­ves in the ban­king sec­tor, but adopted solu­ti­ons will be deve­lo­ped step-by-step. Mar­ket demand and inte­rest in block­chain-based solu­ti­ons is incre­asing signi­fi­cant­ly, while actu­al use cases are still being deve­lo­ped. Fur­ther, the toke­niza­ti­on of digi­tal assets is still in its infan­cy, with many pro­mi­sing deve­lo­p­ments sure to come.
Banks, wealth mana­gers and insu­r­ers should all now look to the oppor­tu­ni­ties offe­red by block­chain tech­no­lo­gies and digi­tal assets if they want to keep up with gro­wing demand as cus­to­mer inte­rest increa­ses. If a bank is not pre­pared, they could risk pas­sing com­pe­ti­ti­ve dis­ad­van­ta­ges on to both new and exis­ting cus­to­mers.
The­re is a big chan­ce that block­chain tech­no­lo­gy and its appli­ca­ti­ons will help shape the future of ban­king; the digi­tal euro is also likely ano­ther dri­ving force in this deve­lo­p­ment. Digi­tal assets and DeFi appli­ca­ti­ons will pro­found­ly chan­ge the face of the finan­cial ser­vices indus­try – at the same time, howe­ver, com­ple­te­ly new reve­nue oppor­tu­ni­ties for insti­tu­ti­ons will be ope­ned up.

Ger­ma­ny is a pio­neer in deve­lo­ping the cryp­to eco­sys­tem. Cryp­to case law is pro­gres­si­ve and careful­ly regu­la­ted by the fede­ral govern­ment. With the BMF let­ter of May 10th, 2022, tax aut­ho­ri­ties were given a legal­ly secu­re and prac­ti­ca­ble gui­de to the inco­me-tax tre­at­ment of cryp­to assets. Smooth and intel­li­gent ser­vices from the ban­king world will ine­vi­ta­b­ly be nee­ded in the near future to unleash and con­trol the dis­rup­ti­ve poten­ti­al of block­chain technology.

We have been sup­port­ing our cus­to­mers in the finan­cial sce­ne in their pro­ce­du­ral, tech­no­lo­gi­cal and regu­la­to­ry trans­for­ma­ti­ons for more than two deca­des. Our con­sul­tants have many years of expe­ri­ence, espe­ci­al­ly whe­re the pro­fes­sio­nal and the tech­ni­cal inter­face, and we are very fami­li­ar with cut­ting-edge tech­no­lo­gies and their emer­gent effects. We also reco­gni­ze the value of your own skills and expe­ri­ence, and your know­ledge and input are always important fac­tors in our work.

Take advan­ta­ge of our exten­si­ve expe­ri­ence and talk to us:

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