Blockchain Summit London 2018: How Blockchain Is Reinventing Banks

The recent event explored the emerging role of blockchain across a range of sectors.

"Blockchain is set to be truly transformative for banks, dramatically reducing costs and increasing efficiency."

By Libby Plummer, Technology Writer

New technologies are transforming the digital landscape, disrupting industries as diverse as healthcare, agriculture, and sport. Blockchain has emerged as a key technology trend in 2018 and while its influence can be seen across a wide range of sectors, nowhere is it set to have more impact than in the Financial Services Industry (FSI).

Blockchain is a type of shared ledger, also sometimes known as a distributed ledger. This is a decentralised, shared database that keeps track of ownership, providing a permanent record of transaction that is difficult to tamper with. Blockchain is the most commonly known shared ledger as it forms the backbone for cryptocurrency Bitcoin. However, it has numerous applications beyond virtual currencies. Somewhat confusingly, there is no universally understood definition of blockchain but the term is most commonly used as a catch-all description for shared ledger technology. This kind of decentralised storage allows for greater transparency and traceability.

Major banking institutions around the world are already making large investments in blockchain. The technology has two major advantages for banks. Firstly, it saves money by streamlining processes, and secondly, it’s more efficient, allowing faster transactions leading to lower overheads and better customer satisfaction. The technology could completely reinvent the banking industry, with Harvard Business Review even predicting that blockchain will do to banks what the internet did to the media.

This was one of the key themes covered at the recent Blockchain Summit London.1
Part of the Blockchain Summit Series — a five-event conference — the recent London event played host to more than 120 expert speakers who gathered to talk about the opportunities offered by this influential technology. Blockchain can be used in a number of ways in the banking industry, with one major opportunity being the acceleration of international payments, which until now, have been notoriously slow. California-based Ripple1 is already providing its blockchain-based translation platform to more than 100 institutions, including Spanish bank Santander1, to enable them to speed up cross-border payments.

The streamlining capabilities of blockchain could have a major impact on trade finance, with transactions that would usually take a week due to prolonged paperwork processes cut down to a single day. What’s more, blockchain can facilitate smart contracts, which not only cut out the middleman but also ensure that the terms of the contract are automatically triggered by a set action or date. This technology will enable banks to improve the quality of their data, with the goal being to enable different banks to share a common database.

One of the most important advantages of blockchain for the banking industry is the enabling of shared access to customer data with assured identity protection. KYC (Know Your Customer) regulations require banks to validate primary documents in order to establish the identity of their clients and prevent money laundering. A group of major banks and regulators including Deutsche Bank1 recently began trialling a KYC app built on the R3 Corda*1 blockchain platform. The idea is that the app can reduce costs and improve the speed of the process by eliminating the need for each institution to individually verify and update KYC data.

“The key to blockchain is security, privacy, and scalability,” explained Dejan Kusalovic, Global Head of Fintech Enabling at Intel, at a panel discussion on blockchain in the banking industry at Blockchain Summit London. Foundational technology plays an important role in the development of blockchain platforms and Intel has already made developments in this area.

Intel® Software Guard Extensions (Intel® SGX) offers hardware-level security and is designed to protect code and data from being disclosed or modified. It allows for better protection for data, whether it’s in use, at rest or in transit. Intel is working with blockchain start-up Enigma1 which has developed a unique privacy protocol that uses SGX to protect data while also allowing computation over the data. This technology will be used to develop functionality for smart contracts on the blockchain-based Ethereum1 platform. In addition, Intel® Xeon® Scalable processors offer a strong foundation for building blockchain platforms thanks to a broad range of hardware-based security features.

What’s more, Intel contributed its Sawtooth Lake shared ledger platform to the Hyperledger*1 project in 2016. Run by The Linux Foundation1, Hyperledger acts as an incubator for blockchain technologies for business and features a number of frameworks. Hyperledger Sawtooth is one of those frameworks and was designed to provide a common set of building blocks that can be customised for individual use cases.

Blockchain lends itself well to a decentralised business model, making it ideal for the banking sector. “Blockchain will increasingly becoming the optimum solution in more cases,” said Kusalovic. But while the technology is set to completely reinvent several aspects of the FSI world, it isn’t suited to everything. Financial institutions must look at what specific business challenges can be solved by the technology. Like any form of digital transformation, blockchain should not be viewed in isolation. Instead, it needs to be part of a broader digital strategy that interlinks with existing systems. To have the best chance of success, banking organisations will need to investigate collaborations with other banks as well as potentially working as part of a consortium. Teaming up with ecosystem partners will also help to accelerate uptake of the technology.

Blockchain is set to be truly transformative for banks, dramatically reducing costs and increasing efficiency. There are a number of challenges to overcome, not least compliance with new legislation such as GDPR, while blockchain-specific regulations can also be expected in future. What’s more, the rise of Open Banking will see traditional banks face stiff competition from an increasing number of fintech startups. However, “the key thing banks have going for them is trust,” said Kusalovic. Trust will be a central issue, with traditional banks having the distinct advantage of a strong heritage on which to build their blockchain-based systems for the digital era.

For More Information:

 How Intel is shaping blockchain technology

https://www.intel.com/content/www/us/en/security/blockchain-overview.html

How blockchain will transform finance in 2018

https://www.intel.co.uk/content/www/uk/en/it-managers/blockchain-transforms-finance.html

What will banks look like in 2030? How new technologies will transform the future of finance

https://www.intel.co.uk/content/www/uk/en/it-managers/technologies-transform-future-finance.html

NextGen banking London 2018: The AI Revolution

https://www.intel.co.uk/content/www/uk/en/it-managers/nextgen-banking-ai.html

Intel Is Enabling the Data Driven Digital Transformation


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