The growing momentum of the blockchain
Posted: 5 February 2017 | Dhiru Tanna, Head of Relationship Management – UK, Ireland & Southern Europe, BNY Mellon Treasury Services | No comments yet
Blockchain continues to be a buzzword in the finance industry, tipped to have the ability to bring about monumental change to the way in which we transact. Dhiru Tanna, Head of Relationship Management – UK, Ireland & Southern Europe at BNY Mellon Treasury Services, examines the progress of distributed ledger technology, and how it has helped to ignite a whole new approach to innovation in the banking world…
Blockchain – the distributed ledger technology (DLT) that underpins bitcoin – holds huge potential to transform legacy transaction p
ractices. With decentralised properties that could allow for enhanced risk mitigation, improved speed and mobility, increased transparency and traceable transaction histories, it certainly holds enormous promise. And a great deal of investment is being dedicated to exploring how this new technology can be harnessed.
Smart contracts is one area where it is believed the blockchain could be particularly beneficial. Smart contracts are programmable codes capable of automatically facilitating, executing and enforcing the obligations, benefits and penalties of an agreement or ‘contract’, using blockchain technology1. This presents the opportunity to remove human intervention – inherently a potential point of error or failure – and thereby significantly enhance efficiency.
Elsewhere, blockchain could help to improve risk mitigation processes. For example, currently, know your customer (KYC) compliance is particularly time-consuming and repetitive, involving clients often being contacted multiple times by different banks for the same information. While KYC registries have been introduced in some countries to address this issue, the shared distributed database properties of blockchain mean that information could be accessed by all members, with everybody owning and updating their own data. That makes blockchain particularly valuable as a means of addressing this pain point.