Blockchain allows us to reimagine banking

Deloitte Finance Center recently released a report on how emerging technologies will transform the banking industry in the next 10 years. The report, titled "Reimagining Banking," states that by 2020, blockchain-based payment systems will reach the same level of transaction volume as the United States' Automated Clearing House (ACH) financial transaction network.

The report lists some of the innovations happening in these areas that will collectively have a huge impact on the banking industry: artificial intelligence, machine learning, blockchain technology, collaborative ecosystems, digital currencies, demographics, and user experience.

As for why the payment industry attracts innovators to join, the report said that on the one hand, there is a huge transaction market of up to 26 trillion US dollars, and on the other hand, the transaction market is inefficient, while consumers are pursuing efficiency and convenience.

“The most disruptive innovation may be blockchain technology”

The report points out that the infrastructure of banks using third-party providers is growing, and in the next 10 years, Deloitte hopes to see a reduction in marginal costs and an increase in reliance on network partners. It also recommends that banks should adopt different contracting and cooperation methods to mitigate operational risks.

"In the future, reliance on non-core third-party infrastructure and talent will become a common phenomenon. Banks will become more closely connected because of a complex network or a network of vendors and third parties."

The report cites the example of U.S. retailers’ slow migration to EVM chip card technology as an example of how the inability to migrate away from legacy systems is a factor hindering transaction speed and cost reduction.

“In the future, it will be common to have private, permissioned chains between a group of counterparties and customers, while payment processors and large banks may own and operate multiple private chains to meet the broad and high volume of payment behavior. An Uber-like private chain (i.e., a blockchain within a blockchain), similar to the Automated Clearing House (ACH) network, is a very likely reality in the future. However, given the complexity of building such infrastructure, this path is not easy to take.”

Despite the threat blockchain technology poses to traditional payment models, Deloitte believes that banks will continue to dominate corporate transactions due to "complexity and high barriers to entry."

The report said that in the future, financial institutions may gradually lose control of consumer payments, which is a role change, and the reduction of intermediaries including merchants and issuers can reduce delays and risks.

Due to the central position of credit in the payment field, the report believes that banks still have the role to play in driving payment innovation.

The report predicts that a state-backed digital currency will become a reality within five years and hopes that such a digital currency will have the function of being "interoperable" with other currencies.

Therefore, Deloitte recommends that banks and other institutions make strategic investments in these innovative technologies and explore blockchain technology through cooperation, employment, crowdsourcing or pilots, encourage wider participation in the payment ecosystem, and shape industry-wide standards with regulators.

Although Deloitte believes that banks should reduce their control over user experience, it also encourages banks to make full use of customer data to customize customer-centric payment solutions for their customers.

Deloitte’s global blockchain efforts

Deloitte is providing blockchain consulting services to its global network clients. Its British subsidiary Deloitte LLP released a report stating that banking, insurance, the public sector and the media will be the four key areas for the application of blockchain technology.

In addition, Deloitte believes that Ethereum's smart contracts have the potential to transform business processes.

However, Deloitte pointed out that the blockchain industry faces huge challenges in development and popularization, among which the key challenges include lack of awareness outside the industry, especially outside the banking industry. Other challenges are organizational culture, regulation and governance, security and privacy, and inefficiencies caused by developing different blockchains to meet different standards.

Original article: https://bitcoinmagazine.com/articles/deloitte-predicts-rise-in-blockchain-based-payments-1458573666
By Charles Small
Translator: printemps
Editor: printemps
Source (translation): Babbitt Information ( http://www.8btc.com/deloitte-predict-blockchain )