The financial industry is one of, if not the most regulated industries in the world. As such, while innovation may appear to be on a smooth road in other sectors, to many the financial world can be viewed as a little slow to the party. However, while the industry can be cautious and rightly so given the role it has in society, innovation is by no means a dead end with the development of new technologies constantly being worked on in the background to push the sector forward. Look at the rise of contactless for example, initially taking a while to pick up, it is now developing at an accelerated rate. This growth has been expanded exponentially too by the current situation we find ourselves in, through the pandemic.
As the landscape changes with social distancing, the role of technology within the financial services sector is only set to grow, with greater emphasis placed on the systems that underpin our online world. In order for us to rely on transactions reaching the other side safely, we need to trust the system is robust enough to repel anything that is thrown at it. For a long time, security has been seen as an impediment to innovation. However, we need to start thinking about it as an enabler to optimising and accelerating things like foreign exchange, cross border payments and remittances.
So how does the industry begin to see security as that enabler to innovation and what areas of technology can be used to make this happen?
Blocking the fraud
One of the biggest challenges the industry faces is fraud. As more companies fall foul of data breaches, data, be it from consumers or big international trade transactions, is becoming less secure meaning cybercriminals can take advantage. A first step in trying to combat that, saw UK based banks recently announce the launch of a new
Confirmation of Payee system that checks the name of the person you’re transferring money to with the name on the account. This was done to mitigate fraud in bank-to-bank transfers. However, while this is certainly a good step in the right direction, it does not protect the transfer or exchange of the data along the payment network. Enter the blockchain.
Blockchain facilitates safe, easy transactions, and builds trust between trading partners. It can even be used to quickly identify individuals through digital IDs. Companies have begun to utilise it by building public cloud services so customers can construct secure blockchain networks within. How they make it safe is by integrating industrial level security systems which can secure records and assets from cybertheft
as used by most major banks.
Blockchain in itself is probably less well known when it comes to use cases, with most associated with Bitcoin, but it is the underlying distributed ledger technology behind it that is really the key to the future of the financial services industry.
It increases the efficiency, especially in a post pandemic world where governments and businesses need to make sure their money works for them quickly. Blockchain acts as that extra layer of trust enabling businesses to track who has access to customer data and where it resides. This is critical in keeping customer data secure and mitigating risk.
So, how do we normalise the uptake and ensure the industry adopts blockchain in a way that will enable it to be a success?
Normalising Blockchain From Day One
In the new normal, like all security aspects, Blockchain has the greatest chance of being successful if implemented early. As banking looks to increase its innovation in these strange times, security must not be an afterthought. If it is, it can still work, but it may slow down that innovation and throw the industry back to the stereotype it can sometimes be known for.
Blockchain has long had an association with the financial industry, but now we are finally starting to see the real uses cases for it come to life, with companies around the world attempting to figure out where it can fit in next. However, with as many as 90% of enterprise blockchain projects launched expected to meet a premature end within 18 to 24 months, there is a long way to go before it will become truly mainstream. However, those that can adopt it early and correctly, such as in payments networks, can get ahead of a game that is sure to grow in the years to come.