Blockchain's Impact on Financial Services

Blockchain's Impact on Financial Services

October 26, 2018
9:10 am

Blockchain has yet to reach fruition, largely due to its sheer novelty and complexity. Those familiar with the technology expect integration of blockchain technology across various industries and economies. Even though a large variety of industries will utilize these services, the financial services industry will arguably be most impacted by blockchain in various ways.

Bâton Global has extensive experience in providing analysis to clients, specifically in organizations that touch financial services. While blockchain technology is considered a foundational technology that will take time to integrate across all industries, it certainly has the ability to disrupt financial services organizations in the near future. What are the specific uses of blockchain technology that will impact financial services organizations?

Cross-border Transactions

Although the finance industry is becoming more automated and processes are more streamlined, cross-border transacting is still a fairly complex and unwieldy system. Fraud is 2.5 times higher in international transactions, which results in $6 billion in fraud losses and $8.6 billion in false declines. Due to high levels of fraud, merchants add additional levels of fraud protection activities, which results in a difficult and longer process for consumers. One potential solution that only recently had been implemented by finance institutions is the usage of blockchain in cross-border transacting.

Blockchain technology has the ability to create a direct link from one party to another, avoiding corresponding banking altogether. Finance institutions could eliminate the many layers of fraud protection through a blockchain’s decentralized nature and impermeable ledger. Last year, Wells Fargo and the Commonwealth Bank of Australia made history, as they utilized blockchain in order to complete a transaction between parties in Australia and the US. Recently, IBM partnered with two blockchain companies to facilitate cross border transactions between the financial institutions across the world.

Transformative technology, such as blockchain, will bring organizations around the world closer together. In order to ensure future success, having a global mindset is critical. In the example above, 60 percent of consumers who partake in cross border transacting frequently do so with parties outside their own country, and this number will only grow. Organizations that seek to instill a global mindset in employees are set to see greater success in an ever-shrinking world.

Digital Assets and Trading

With Bitcoin’s inception in 2009, the concept of uncopyable digital assets was established due to the capabilities of blockchain technology. Today, digital information not utilizing blockchain can be copied from the original owner, whether this is intended or not. Bitcoin is uncopyable, which prevents double spending and copying of bitcoin’s code. This capability will provide greater protection of intellectual property, as owners can keep a greater hold on their unique property.

This same concept is being applied to the issuance of public shares of stock. In July 2017, the state of Delaware signed into law the ability for organizations to issue stock using blockchain technology. Being a state where 85% of IPOs are incorporated, their decision legitimizes the technology and gives organizations that go public the ability to issue stock using blockchain. As described above, usage of the blockchain platform in stock trading would reduce trading errors and result in less delay in trade completions.

Trade Clearing

A common term that is used in traditional trading is “T+3,” which refers to a trade clearing three days after it was made. In a world where most information is available in real-time, three days in clearing a transaction is an eternity for consumers and results in financial institutions making fewer transactions. Blockchain technology would provide immediate clearing of transactions, as the entire process of the transaction occurs at the same stage. As mentioned above, a trade would be considered a digital asset, and a trade is considered a settlement in blockchain without the necessary need to go through multiple layers as is required with a typical trade.

Changes in trade clearing and similar processes will greatly impact the consumer. Organizations that understand the impact on customers, both positive and negative, will implement strategic initiatives that are more successful and forward thinking.


Stakeholders are continually demanding higher detail and more frequent information regarding various organizations, and it is a difficult task for those auditing the information. Information in private databases raises scrutiny among all stakeholders. Blockchain technology offers the ability to develop unchangeable, time-stamped ledgers where data is unable to be manipulated. Records can also be shared in real-time with various stakeholders, answering any questions that stakeholders may have. Additionally, any changes in recording errors are eliminated with blockchain technology as they are verified upon entry.

Due to the revolutionary and disruptive nature of this technology, industry leaders, regulatory bodies, and others have raised concerns.  Confidence in the system is lacking, largely due to the possibility of blockchain digital signatures (user identity) to be lost or stolen. A solution would be for auditors to have the ability to verify user identities, ensuring confidence in records.


Recently, large financial institutions have been in the news for missteps employees have made such as opening false accounts, dishonest reporting, etc. These missteps have resulted in a decrease in consumer trust and loss of customers, and these organizations are still recovering from the scandal. Even though it can be argued these missteps resulted from a disconnect between leadership and employees and a lack of strong culture, a case can also be made that blockchain technology would have prevented these scandals.

Due to the near impossibility in manipulating blockchain’s ledger and the ability to verify identity through blockchain, employees would not have been able to manipulate records as easily, and records that were manipulated would be uncovered sooner. Blockchain’s transparent ledger can also be coded to comply with requirements from governing bodies. These organizations would be able to review records in real time, and compliance process time will be greatly reduced. The widespread use of blockchain could result in fewer missteps in compliance, real-time record viewing by governing bodies, and greater transparency among all stakeholders.


Bâton Global’s clients have established a greater organization-wide understanding of emerging technologies such as blockchain technology. In order to ensure future success, organizations must determine whether pursuing implementation of these technologies will provide greater profitability and positively impact stakeholders. 

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October 26, 2018
9:10 am
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