Financial Services can make use of a universal and decentralized database in an endless number of ways. There are currently thousands of banks using similar databases, these being managed separately, which makes them very expensive. On the other hand, the blockchain is universal and can be refused by many institutions, not only financial but also; educational, commercial, services, etc.
The blockchain lowers maintenance costs tremendously. And it opens up opportunities for companies with limited funds to connect to blockchain services and be profitable.
The bank of Estonia LHV is creating digital goods through its Cuber (Cryptographic Universal Blockchain Entered Receivables). This is a certificate of deposit from where you will depart to build innovative financial products and services. The bank also suggests opening its platform so that independent start-ups and programmers can connect to use its platform.
The opportunity offered by the blockchain to financial services (banks, loan houses, cooperatives, financial institutions, etc.) is gigantic. It allows institutions to create customer participation and change the business model. Looking for banks to offer services at a lower cost and much more efficient.
Financial Services and the Internet of Things
We are in a technological revolution where every day there are more intelligent devices connected to the Internet. The IoT will allow machine-to-machine communication, not only to know the weather or see who knocks on the door.
Let us think that at some point there will be machine-to-machine payments, within the context of the Internet of Things. In a few years my autonomous car will be able to use Uber services while I am not using it. My car automatically charges for the service, and through a smart contract you can connect to the bank and pay off the loan.
The vehicles will travel to the workshop for their minor service and pay with what they received at Uber. And all verified by means of a blockchain.
Currently, there is the Slock.it project, which works with smart contracts and blockchain. Slock.it allows by means of smartcontracts and a lock to transfer ownership of a physical good.
Let's say I'm traveling and I need a room to spend the night. From my phone I can connect to the hotel smart contract and book a room. Upon arriving at the room, your lock would recognize the token I received on my phone and allow access.
All this via the blockchain, without a centralized control system or human being present.
How to apply blockchain to Financial Services
The first thing is to identify the problem in the financial service and see if it can be solved with technology. The primary functionality of the blockchain is verifiability and certainty in transactions of all kinds.
Kynetix is currently working on its Sentinel inventory management system to create electronic records within the Bitcoin blockchain. These records keep the title, ownership and storage of products or commodities. This system creates an unalterable link between the electronic world and the financial markets. All this without changing the industry.
Commercial Finance
An efficient way to automate the commercial exchange in a tangible way is through the letter of credit. If banks manage to place the financial chain in the blockchain, that will be gigantic. But exporters, importers, transport companies and manufacturers must be included, in addition to customs authorities.
Currently, the letter of credit and shipping manifestos have a very complicated flow of information that consumes time. Launching a financial and logistics solution for these actors increases the effect.
As a result, we will have open automation of financial stationery (policies, insurance, etc.) and customs procedures.
Consequently, the costs of the products and the time to remove them from customs is significantly reduced. In this model, banking is the central axis that involves companies and the tax collection entity. The bank offers open and unalterable documents of each merchandise container for public scrutiny.
Collections and payments on the blockchain
Since the creation of Bitcoin one of its attractions has been to serve as a means of payment. Imagine payment mechanisms available 24/7 with all services linked. We return to the example of the importation of goods and the customs process. With the integration of smartcontracts, the entire complex verification and payment chain is reduced to simple clicks.
I need to import appliances from Japan. The manufacturer enables a smart contract for the sale of household appliances, which charges for the goods via a trust. The contract automatically involves the maritime cargo service and as an auditor of the process to the insurer. Upon entering the cargo at its destination, it is audited by a third party representing the insurer. If everything is in order the smarcontract releases the trust and the manufacturer receives his payment. Then the smarcontract sends the cargo information to the customs authorities. The authorities send the import tariffs to the smarcontract and it makes the established tax payment. The importer is notified that he can take out the product.
The process is efficient because through the blockchain it has been distributed and transparent to the institutions involved.
Obviously there are more details in the import cycle. The general idea is to leave payment processes in the hands of the blockchain. When using a cryptocurrency the waiting times to receive the money are reduced to minutes.
If a bank develops its own version of the blockchain, its customers may use it. However, other banks will not (remember the distrust that exists between them). What is needed is a standardized protocol, by some global entity such as the IEEE.
IBM Blockchain and Walmart
What is already a reality is the alliance between IBM and Walmart to use the blockchain in its supply chain. The technology is being applied to real-world problems, such as the tracking of products and cargo containers. The tests carried out to demonstrate the speed and safety of the process never seen before.
Walmart is one of the 400 customers with whom IBM is testing in the blockchain area. Likewise, IBM and Maersk , the maritime cargo giant, are developing a blockchain-based solution. This innovative system will be able to track the tens of millions of containers around the world.
The Hyperledger-based solution will allow to transparent the flow of information, supply chains and logistics between business partners. Not to mention the millionaire savings for the transportation industry.
For its part, Microsoft is working together with JPMorgan Chase on an Ethereum-based solution to compete against IBM.
Deutsche Bank
The bank has said it has been exploring several cases of blockchain use in areas such as payments and settlement of fiat currencies, asset records, compliance and compensation of derivative contracts, regulatory reports, KYC, AML records, improvement of post-processing services. trade, etc. He has been experimenting with these technologies in his innovation laboratories in London, Berlin and Silicon Valley (July 2015).
NASDAQ
The brokerage company initially revealed (May 2015) that they planned to use blockchain as a Private Market Platform technology. The NASDAQ Private Market Platform, an initiative launched in 2014, to allow pre-IP trading between private companies. He has also said to take advantage of a concept of colored coins, to build his private exchange platform.
DBS Bank:
The bank organized a blockchain hackathon in Singapore in association with Coin Republic. (May 2015)
The winners were Omnichain (first place, investment platform for emerging markets), Nubank (second place, banking for the unbanked) and BlockIntel (third place, transaction security platform).
EBA
The Euro Banking Association (EBA) has published a report on the implications of crypto-technologies from the perspective of transaction banking. These technologies could be used by banks to reduce the costs of governance and auditing. And thus provide better products and faster time to market.
United States Federal Reserve
The Federal Reserve is working with IBM to develop a new payment system linked to blockchain. (March 2015)
Taken from Blockchain para Servicios Financieros