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

  • Onex Corp. to buy venue manager SMG Holdings for undisclosed price

    Economic CTV News
    TORONTO -- Onex Corp. (TSX:OCX) says it has agreed to acquire a U.S. company that manages hundreds of sports, entertainment and business venues including Soldier Field, home to the NFL's Chicago Bears. The Toronto-based private equity company didn't disclose how much it will pay for privately held SMG Holdings Inc. Source
  • Apple buys music identifying app Shazam

    Economic CBC News
    Shazam has been valued at roughly $1 billion US. (Simon Dawson/Bloomberg) Apple is buying Shazam, a popular app that identifies music for users by listening to a short snippet of it. Technology website Techcrunch first reported on the possibility of the merger last week before Apple made it official in a statement Monday. Source
  • Securities-related trial underway in Montreal for ex-Amaya CEO David Baazov

    Economic CTV News
    MONTREAL -- The securities-related trial of former Amaya CEO David Baazov and others accused of insider trading is underway at the Montreal courthouse. It is opening with a request by the defence to have the case tossed due to unreasonable delays in getting evidence. Source
  • Stay request at insider trading trial for ex-Amaya CEO David Baazov, others

    Economic CTV News
    MONTREAL -- Even before the first witnesses could be heard at a rare insider trading case that involves former Amaya CEO David Baazov and others, lawyers representing the accused attemped Monday to have the charges stayed. Source
  • Calgary-based water pipeline company accepts $509M offer from New York partner

    Economic CTV News
    CALGARY -- A Calgary-based water pipeline technology and inspection company says it has agreed to be sold for more than half a billion dollars to New York-based Xylem Inc. Pure Technologies Ltd. says the offering price of $9 per share or $509 million in cash is more than double its closing share price last Friday. Source
  • Of government and golf courses: Mulroney's East Coast experiment, 30 years later

    Economic CTV News
    HALIFAX -- Ben Cowan-Dewar was a bright-eyed 25-year-old entrepreneur when he visited Inverness, N.S., and saw a jaw-dropping landscape fit for a luxury golf course. Past the abandoned mines and hardscrabble edges of the Cape Breton village, he envisioned a boutique 18-hole course and upscale resort perched atop craggy cliffs. Source
  • Bitcoin futures contract flirts with $19K US, even as current price hovers near $16K

    Economic CBC News
    After jumping out of the gate, the first bitcoin futures contracts to trade on a mainstream exchange stabilized on Monday at around $18,000 US. The Chicago Board of Options Exchange started trading a bitcoin derivative contract on Sunday evening. Source
  • Lyft starts global expansion with Toronto service launch Tuesday

    Economic CTV News
    TORONTO - Ride-hailing service Lyft will launch its service in Toronto on Tuesday, marking its first expansion outside the United States. The addition of Lyft brings increased competition to Uber in Canada's largest city. Source
  • Will misconduct scandals make men wary of women at work?

    Economic CTV News
    NEW YORK -- Some women, and men, worry the same climate that's emboldening women to speak up about sexual misconduct could backfire by making some men wary of female colleagues. Forget private meetings and get-to-know-you dinners. Source
  • CRA's new Postal Code Project targeting richest homeowners

    Economic CTV News
    With the release of the Panama and Paradise Papers, the headlines have been filled with world celebrities engaging in offshore tax evasion. But Canada has its own problem with tax evaders who engage in “creative bookkeeping,” which is why the Canada Revenue Agency has launched a new initiative to crack down. Source