Using blockchain could save retail banks nearly $19 billion, according to researchers.
Still a relatively new technology in the grand scheme of things, blockchain has yet to be readily adopted by retail banks, largely thanks to regulatory uncertainty regarding the status of blockchain and cryptocurrency, as well as strict regulations in the banking industry preventing change from happening rapidly.
But researchers at McKinsey estimate blockchain has the potential to save retail banks almost $19 billion in costs that would otherwise be sunk to card mishaps, fraud, customer on-boarding and regulatory fines.
They identify three use cases in which blockchain technology could have revolutionary impacts for the sector: remittances, fraud prevention and risk scoring.
Cross-border payments, which total nearly $870 billion annually, generally feature a number of fintechs in the payment chain which creates inefficiencies — blockchain, McKinsey says, could bring benefits in the order of $5.8 billion a year.
The research also argues that blockchain technology could help speed up risk management by pooling large volumes of data that can be anonymised and protected by the ledger’s encryption protocols.
And finally, blockchain’s inherent security features, like enabling customers to use a digital fingerprint, could less the estimated $29 billion banks lose to fraud every year.
“Blockchain technology could bring value in core parts of the retail banking business model. However, retail banks have been slow to engage, and the technology faces challenges in terms of scaling, the volatility of crypto assets, and trust,” the report said.
“The key to countering those concerns is to keep an eye on the prize: lower costs, less friction, and a safer retail banking system.”
This content does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.
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