Blockchain, banks and the future of money

The banking sector has largely been slow to adopt blockchain and other emerging technologies. However, this is likely to change over the next decade as finance houses partner with smaller fintech companies and increasingly focus on the developing world.

This was a main panel discussion at the recent Technology of Tomorrow Conference which took place in Warsaw, Poland. The panel was hosted by Malgorzata Ignaczewska (Program Manager at KIR) and included:

Processing speeds and being stuck at the gas station

Zatorski began the panel by noting that one of the biggest advantages that blockchain technology offers traditional financial systems is its speed of processing. He noted that card companies such as Visa and Mastercard are capable of processing 5,000 – 7,000 transactions per second while the BSV Blockchain has performed tests showing it is capable of 500,000 transactions.

‘There is no worst-case scenario than being stuck at the gas station and not being able to pay or leave (because the network can’t handle your transaction),’ he said. ‘When I was running a card transaction processing business that was our worst nightmare – getting phone calls from customers who were stuck. And they are unlikely to care about your explanation of the network going down.’

While further blockchain adoption is necessary, Zatorski noted that banks are still heavily regulated which has slowed adoption of the technology in the sector. He added that emerging technology is always seen as risky for banks, which is why fintechs and startups are often the first movers in the space.

Africa and the developing world to lead the way

While major financial firms in Europe and the US are still grappling with the different ways they can adopt blockchain technology, countries in Africa and the rest of the developing world are effectively ‘leapfrogging’ ahead, said Prinz.

He noted that many of these countries have moved cash payments to mobile payments – effectively bypassing the more traditional banking sector. He added that this is also likely to be the case with the adoption of digital cash and Central Bank Digital Currencies (CBDCs).

‘Banks provide a service to society by providing trust, security and stability. Because of this I also see this sector less likely to be a frontrunner in innovation. There are regulations and there is a lot of fear of regulators in general. They see more of a profit opportunity by providing access to digital assets for investment purposes and they have not explored the utility that the technology provides.’

Because of this, there is a tremendous opportunity for middle and back offices to explore efficiencies they can gain around auditability and transparency. He added that regulators are increasingly likely to see blockchain as an immutable data ledger and may even make it mandatory to use such services.

Prinz also believes that peer-to-peer electronic cash, as detailed in the original Bitcoin white paper, is also likely to see increasing adoption as a technology system.’ It enables a very efficient transfer of value and its value is not just monetary but is (based on) data. This technology, because of its efficiency, allows you to put a price tag on data – which is a new concept.’

A banking perspective on AI

Stasczak echoed the comments of his fellow panellists by noting that banks can’t be agile due to their inherent size and the regulatory scrutiny they face. Despite this slow response, he noted that banks will still lay a key role over the next decade as they partner with smaller fintechs.

‘Banks are trying to build very sophisticated solutions but it might take them three to five years. For fintechs, the same solution can be built in less than a year. These banks and fintechs can be competitors but if they collaborate and build partnerships (the sector) will begin to fly.’

He noted that these partnerships by their nature can be hit-or-miss, but the sheer benefits outweigh the cons. Stasczak added that banks will have to adapt their operating models to account for these smaller disruptors in the space.

You can watch the full panel discussion below: