Bitcoin technology could help banks cut costs, experts say

TORONTO - The virtual currency Bitcoin has earned a reputation as a plaything for libertarians or a tool used to covertly buy drugs on the Internet.

See Full Article

But more recently the technology underlying the currency - referred to as "blockchain" or "distributed ledger" technology - is being touted as the next big thing poised to transform the financial services industry.

In order to prevent themselves from being blindsided, Canadian banks are jumping on board, exploring ways the technology can help streamline their processes.

"I do think blockchain is a massive opportunity," Linda Mantia, executive vice-president of digital, payments and cards at Royal Bank (TSX:RY), said during a panel discussion on financial disruption in Toronto late last year.

"The banks are playing a huge role in shaping what's going to happen with blockchain," she added.

Blockchain technology works by maintaining a shared ledger containing the details of every transaction and distributed through a network of participating computers.

In essence, it provides a faster, cheaper and more secure way to transfer money by cutting out the middle man.

Although Bitcoin was first perceived as a disruptive threat to the banks, creating the opportunity for customers to transfer money between each other directly, the technology that underpins it now promises to improve the banking experience in a number of areas, including cross-border transactions.

Currently, when a customer wants to wire money to another bank, it's a tedious, costly and time consuming process that typically requires a visit to a bank branch to fill out a lengthy paper form.

"It's a huge pain," says Ryan Connors, chief technical officer of Kitchener, Ont.,-based Green Brick Labs, a cryptocurrency startup.

"I'm a pretty smart guy and I mess up my bank transfers 50 per cent of the time. It is not user friendly whatsoever."

Connors says adopting blockchain technology could allow banks to transact directly between one another, saving on the fees they pay to companies like SWIFT that verify cross-border transactions. For customers, that could mean faster and cheaper cross-border transactions from the comfort of their homes.

However, that kind of application could be years away.

Blockchain technology is still in its infancy and widespread adoption by the world's financial services institution would be necessary to replace the status quo, according to Matthew Spoke, strategy and execution lead at Rubix, a blockchain software platform launched by professional services firm Deloitte.

For the time being, banks are studying ways that the technology could help them streamline their own internal processes - something that could reduce headaches for clients and amount to massive cost savings for the institutions.

"Right now there are a lot of manual processes going on in finance; literally a lot of paper and phone calls," says Anthony Di lorio, founder and CEO of Decentral, a Toronto-based company that is consulting some of the banks on how they can make us of blockchain.

"This technology has the potential to automate a lot of their systems."

Some Canadian banks are experimenting with how blockchain could be used to administer loyalty programs or internal employee rewards systems in order to test-drive the technology, according to experts.

South of the border, the Nasdaq stock exchange made headlines last year when it used a distributed ledger to transfer shares to a private investor, removing the need for a clearing house.

But the potential applications of blockchain go beyond finance, promising to transform everything from how personal medical records are kept to how government agencies verify your identity.

"We're looking very closely at the concept of digital identities and creating your persona in a way that you can track attributes of your identity and share those attributes with third-party organizations as you need to," says Spoke.

"That's one of the most powerful use cases."



Advertisements

Latest Economic News

  • Asian stocks tick higher despite North Korean missile fears

    Economic CTV News
    TOKYO - Asian shares were mostly higher Monday despite worries over regional tensions after a North Korea missile launch failed over the weekend. KEEPING SCORE: Many markets in Asia and Europe were closed for Labor Day. Source
  • Early cannabis sales 'unbelievably high' after legalization: feds' U.S. consultant

    Economic CTV News
    OTTAWA -- A U.S. consultant hired by Ottawa to assess Canada's eventual recreational pot market says jurisdictions that regulate cannabis should expect "unbelievably high" sales growth in the first few years as criminals are driven out of business. Source
  • Yo ho ho! Pennsylvania aims to smash U.S. embargo on Cuban rum

    Economic CTV News
    HARRISBURG, Pa. -- Pennsylvania's Cuban rum run got its start in a chance meeting last fall in the parking lot in front of the state capitol. "'You know, we have rum,"' a visiting Cuban government liaison told state Sen. Source
  • Is this the future of college: Online classes, but no degree

    Economic CTV News
    WASHINGTON -- Connor Mitchell's university classes take place online, he doesn't have any exams and he studies in a different country every year. Is he looking into the future or taking a gamble? With college costs rising steadily and with more courses available online for free, some observers are beginning to question the need for a traditional college education that may include lectures on Greek philosophy but burden students with massive debt. Source
  • New York City pitches to Canadian tourists amid 'Trump slump'

    Economic CTV News
    TORONTO -- New York's tourism industry is worried U.S. President Donald Trump's "America First" policies are turning off Canadian visitors, and they're heading north this week to woo Canucks and their tourism dollars. The head of New York City's official tourism organization, NYC & Company, minces no words in admitting he's keen "to counter a little bit of the negative rhetoric that is coming out of Washington. Source
  • Iconic Dad's chocolate chip cookies discontinued, customers bitter

    Economic CBC News
    For months, some Canadians have been searching in vain for their beloved Dad's chocolate chip cookies. A current Facebook thread on the topic is full of tales about quests for the item. Source
  • U.S. economy expanded at weakest pace in 3 years in first quarter of 2017

    Economic CTV News
    WASHINGTON -- The U.S. economy turned in the weakest performance in three years in the January-March quarter as consumers sharply slowed their spending. The result fell far short of President Donald Trump's ambitious growth targets and underscores the challenges of accelerating economic expansion. Source
  • Montreal landlord fined after tenants rent out condo illegally

    Economic CTV News
    A Montreal landlord says he’s been fined more than $1,200 because the tenant living in his condo listed the space on Airbnb without his knowledge. Gerry Galiatsatos said his unit came with tenants when he purchased it less than a year ago. Source
  • Swedish cows in a great moooo-d as summer pastures open

    Economic CTV News
    DROTTNINGHOLM, Sweden -- Despite a cold wind and chilling temperatures, spring has come to Sweden. At least, spring for the milk cows. In an annual event that warms hearts across the country, "koslapp" -- the cow release -- has become a popular family outing for urban residents. Source
  • Trump to spend Day 100 in office talking trade

    Economic CTV News
    WASHINGTON -- U.S. President Donald Trump is marking his 100th day in office by talking tough on trade.Trump's first 100: Day-by-day highlights Analysis: We've read all President Trump's tweets, so you don't have to The White House says the president will sign an executive order Saturday that will direct his Commerce Department and the U.S. Source