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

  • Moody's cuts China rating over rising debt, slowing growth

    Economic CTV News
    BEIJING - China has criticized a decision by the Moody's rating agency to cut its rating for Chinese government debt and defended Beijing's finances and economic reforms. A finance ministry statement complained Moody's used "inappropriate methods" when it cut Beijing's credit rating and overestimated the scale of its economic difficulties. Source
  • Alberta government introduces bill to cap electricity rates to stop price spikes

    Economic CTV News
    EDMONTON -- Electricity rates in Alberta would be capped under legislation the provincial government introduced Tuesday, a move it says will protect customers from major price spikes. The government says the four-year cap of 6.8 cents per kilowatt hour is expected to be in place by June 1. Source
  • Toronto stock index climbs on banks, industrials

    Economic CBC News
    Canada's main stock index eked out a moderate gain Tuesday as financial stocks got a boost ahead of Canadian bank earnings this week. The Toronto Stock Exchange's S&P/TSX composite index climbed 18.48 points to 15,476.94, also helped by a rise in industrials and utilities stocks. Source
  • CFO of Soup Nazi-inspired company indicted on tax charges

    Economic CTV News
    NEW YORK -- The chief financial officer for a company licensing recipes from the real-life chef who inspired the "Soup Nazi" character on "Seinfeld" has been arrested on tax charges alleging he cheated the government out of a half million dollars. Source
  • Some diesel Dodge Ram pickups and Jeep Grand Cherokees cheat emissions tests, U.S. says

    Economic CBC News
    The U.S. government is suing Fiat Chrysler, alleging that some diesel pickup trucks and Jeep SUVs cheat on emissions tests. The lawsuit filed Tuesday by the Justice Department marks the second time the government has gone after an automaker alleging use of software on diesel engines that allows them to emit more pollution on the road than during Environmental Protection Agency lab testing. Source
  • US Justice Department files Chrysler emissions cheating lawsuit

    Economic Toronto Sun
    DETROIT — The U.S. government is suing Fiat Chrysler, alleging that some diesel pickup trucks and Jeep SUVs cheat on emissions tests. The lawsuit filed Tuesday by the Justice Department marks the second time the government has gone after an automaker alleging use of software on diesel engines that allows them to emit more pollution on the road than during Environmental Protection Agency lab testing. Source
  • OPEC set to prolong oil output cuts by nine months

    Economic CBC News
    OPEC is likely to extend production cuts for another nine months, ministers and delegates said on Tuesday as the oil producer group meets this week to debate how to tackle a global glut of crude. OPEC's top producer, Saudi Arabia, favours extending the output curbs by nine months rather than the initially planned six months, as it seeks to speed up market rebalancing and prevent oil prices from sliding back below $50 per barrel. Source
  • U.S. says Fiat Chrysler used software to beat emissions tests

    Economic CTV News
    DETROIT -- The U.S. government is suing Fiat Chrysler, alleging that some diesel pickup trucks and Jeep SUVs cheat on emissions tests. The lawsuit filed Tuesday by the Justice Department marks the second time the government has gone after an automaker alleging use of software on diesel engines that allows them to emit more pollution on the road than during Environmental Protection Agency lab testing. Source
  • Are 30-somethings earning more than their parents? StatsCan study says yes

    Economic CTV News
    OTTAWA -- A new study from Statistics Canada says that Canadian children have, on average, fared better financially than their parents. The research published today finds that of Canadians who turned 30 between 2000 and 2014, between 59 and 67 per cent -- depending on the year -- had a family income that was equal to, or greater than what their parents earned at the same age. Source
  • In Bombardier fight, Boeing sees ghost of Airbus ascent

    Economic CBC News
    Two words underpin Boeing's decision to launch a U.S. trade complaint against Bombardier, which plunged it into a row with Canada last week: "Never again". Allegations that the Canadian firm dumped newly designed CSeries passenger jets in the United States at a steep loss have threatened a sale of F/A-18 warplanes to Ottawa, sending Boeing scrambling to save the deal. Source