Contrary to popular belief, Satoshi was not the first one to come up with the idea of a Distributed Ledger Technology [DLT]. However, his white-paper and the resultant Blockchain has certainly made many sit up and take notice. An obvious use would be in transferring money, something that the traditional financial institutions almost immediately understood.

Today, even though investor confidence has been shaken by the events that unfolded last year, the technology itself is sound enough to weather the storm. This then brings to the fore the conundrum the industry faces, fight to replace the system or join it. Here is a look at the current relationship status of blockchain and banks.

As mentioned, DLT has been explored before by the banking sector. This was because of the potential benefits that technology offers.

Blockchain enabled services could offer a faster transaction rate. At a time when most bank transactions come with a standard disclaimer of ” up to 3 working days”, the possibility of completing a transfer in a matter of seconds is rather enticing. In this fast-moving age, the ability to offer speedy transactions, in a matter of seconds, to a large customer base would certainly set apart a bank. Furthermore, quick transaction times gives less time for unwanted intervention and encryption helps to keep the data secure. To further enhance security, Blockchain has an immutable ledger. All this ultimately affects the most important metric of any business, their profits. Using the tech can help save upon up to 50 percent of the operational costs for banks. Speedy settlements, it has been found, not only save transaction costs but also allow for more transparency.

While the international banking system is still the undisputed leader by a long way, blockchain powered services are no longer a novelty item, either. They have been steadily inculcated a following and attached themselves to the existing system if only to show their usefulness.

In one aspect where the tech has made an undeniable mark in the field of international monetary transactions. With an estimated yearly turnaround of over $150 trillion, this is a lucrative market that has ridiculous overhead costs. Something that Ripple has recognized and tapped into, resulting in their xRapid fast becoming a major rival to the mainstream alternative SWIFT. Many had suggested that SWIFT will eventually buy off Ripple, however, dispelling such ideas Brad Garlinghouse, the head of Ripple stated that he was more focused on writing the narrative the other way round and had already partnered with more than a 100 banks that are currently using SWIFT.

Secondly, Blockchain, more specifically Ethereum, introduced Smart Contracts; a way to encode the terms and conditions that cannot be altered. By being automated, the entire transaction only occurs when certain conditions are met and thus it requires no intervention or intermediaries. This has been touted to save the current financial set-up close to a trillion dollars annually.

Thirdly, storing and maintaining the customer's data is a huge and expensive undertaking. Top banks routinely shell out over $100 million on this. Since blockchain is an immutable ledger, it can safely store a customers history and activity log. This can then be used to share with other financial institutions. The same information can also be used effectually for the purpose of reports and audits at a tenth of the current cost.

Lastly, the use of digital wallets has seen a meteoritic rise. Wile the number of people are still minuscule at 25 million, the opportunities offered by such wallets has been noted. In fact major European and American banks have begun patenting services in anticipation. After all a process that usually takes almost a month, using this technology, can be sorted in only a couple of days.

The effects of such a disruptive technology have a global impact. This is not lost on the banks, with almost all exploring or using it. Across all markets, major banks are checking out the scenarios to keep their stranglehold over their current markets.

American institutions such as Bank of America and JP Morgan Chase are actively exploring and registering Blockchain-related patents. Similarly, a host of European banks are teaming up with tech giant IBM to test bank transfers. Apart from recognizing the security and scalability offered by Blockchain its ability to ensure seamless transactions has seen the Santander Group link up with the Ripple-Net for cross-border transactions. A host of East European banks have also been looking at active use cases to implement the technology.

Over in the largest market, by population, Asia, China has been working on a blockchain enabled trading platform. Despite a crackdown, the China Banking Association (CBA) has already registered the top ten banks in the country to it. A similar story unfolds south of the Himalayas, where India, with its hostile attitude, still sees a number of banks forming a consortium to use blockchain. While the middle east is not a big fan of crypto it has still seen the National Bank of Kuwait (NBK) launch a cross-border remittance platform.

Lastly, central and south America along with Africa is seen as a major bone of contention in the tug of war between the two ideas. While Africa is yet to make any major headway in terms of cryptos, South African banks have already started to use An Ethereum-based Quorum Blockchain to enable faster bank-to-bank payments. Similarly, Latin America, while not using cryptos in the traditional sense, has embraced blockchain and is a shining example of a success story of what the technology can truly be.

All these world events show two things. The technology is here to stay and the banking industry is not losing sleep over the impact of the blockchain. While it is possible to replace traditional banking institutions, it will be a long and arduous process. What is more, there are still challenges that the nascent industry needs to overcome before being a serious contender.

In terms of time-frames, banking has been around since before America was discovered by Columbus. Blockchain came about the time Christiano Ronaldo won his first Footballer of the year. There are obvious teetering issues as the industry matures. As things stand there are still issues with multiple banks lacking common standards.

A bigger issue is the lack of common knowledge about what Blockchain is and how it works. A report shows that only one in four top banking executives have a working knowledge about it. The biggest issue is that of regulation or the lack of it. Countries are continuously striving towards greater clarity. Some like Malta and Japan are doing well in this regard. Yet with the US still ironing out issues, there is still time until the general populace has any sort of faith in the tech.

The ongoing tussle shows that while Blockchain is not yet ready to step up and overtake the banks, it is no longer a niche concept relegated to drawing room discussions. While some feel that Blockchain might not be an expense-saving machine as some quarters are trying to promote it, it is also true that the impact of banking the unbanked is immersible. One can only end with a reminder that this is not a war and that if either the technology forges a new path or the existing set up embraces the technology, it doesn't matter so long as the people are the ultimate winners.

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