Blockchain and distributed ledger technology offer a unique solution by enabling digital and alternative payment methods and supporting a new asset class. These technologies are the infrastructure for the new digital currencies and their associated use cases, which are not currently part of the traditional financial system.
These technologies create a bridge between the new financial infrastructure and the traditional financial infrastructure. I expect they will also create a bridge to a more secure, less risky, and regulatory-controlled environment for both consumers and financial institutions while enabling financial institutions to generate more revenue and profit. Additionally, consumers will be able to manage and control their finances all in one place.
Like any technology, blockchain should be fit-for-purpose, and financial institutions will want to consider downstream disruptions:
- Lack of integration: The on-chain integration and processing of public blockchains like Bitcoin and Ethereum lack integration with traditional banking systems and accounts, which can lead to a lack of transaction visibility and consumer protection.
- Interoperability and programmability: For rapid deployment and convergence of cloud-based services, blockchain solutions should use the same programming languages as new generation technologies to speed up adoption and implementation, as well as ensure converged integration.
- Performance and scalability: If the technology doesn’t perform and if it doesn’t scale, no one will consume or use it.
- Identity management and privacy: Across devices, industry networks, cloud instances and hosted infrastructure, organizations will need to secure and manage identity and privacy.
- Usability and applicability: Customers will want to use the service across industries with industry-specific and cross-industry use cases like digital identity, digital cash, digital assets, trade finance and insurance.
While addressing one or two of these criteria through a blockchain solution can be beneficial, it is essential to meet all of these challenges to effectively adopt, implement and achieve a return on investment from blockchain technology.
4. Open API
Open APIs have the potential to expand the scope and integration of digital financial services with other industries. Globally, newer business models have emerged, where non-traditional finance industry firms are venturing into the banking sector by building partnerships with banks and using Open APIs in integrated platforms.
There are potential security concerns with Open APIs and regulations from a data-sharing perspective. A robust cybersecurity posture and architecture, such as advanced cybersecurity and biometrics, combined with blockchain can further accelerate the execution of Open APIs safely and garner an accelerated return on investment.