Banks vs. Blockchain: Friends or Foes?

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The relationship between big banks and blockchain is… complicated. It’s like that “frenemy” relationship you had in high school. In Chapter 3, Pierluigi Martino dives into why the banking world is both terrified and obsessed with this tech.

The Threat: Disintermediation

That’s a long word for a simple idea: cutting out the middleman. For centuries, banks have been the middlemen. They verify your identity, hold your money, and make sure transfers actually happen.

Blockchain was literally designed to do all of that without a bank. Gartner even predicted that 80% of traditional financial firms could be out of business by 2030 because of this shift. Big names like Bank of America and JPMorgan have even started listing “cryptocurrencies” as a risk to their profits in their official government filings.

The Opportunity: The “Good Side” of Blockchain

But here’s the twist: banks aren’t just sitting there waiting to be replaced. They’re taking the “good parts” of blockchain and making them their own.

Instead of using public chains like Bitcoin, they’re building private blockchains. These are closed systems where banks can move money between each other instantly and securely.

Where it’s actually working

Martino highlights some crazy efficiency gains:

• International Payments: Sending money to another country can take 5 days and cost a ton. With blockchain, it can take 6 seconds and cost 80% less. Santander already has a service doing this.
• Trade Finance: When companies ship goods across the world, it usually involves mountains of paperwork and 5-10 days of waiting. HSBC and ING used blockchain to cut that down to just 24 hours.
• Syndicated Loans: These used to take 20 days to settle. Now, it can happen in seconds.

The Real Kicker

The banking industry thinks blockchain could save them up to $20 billion a year in infrastructure costs. That’s why they’re investing so heavily.

But here’s the thing: while banks are getting more efficient, the threat of being “replaced” by decentralized apps is still there. It’s a race to see who can use the tech better.

Tomorrow, we’ll look at the specific “threats” that are keeping bank CEOs up at night and how they’re trying to fight back.

Next: The Threats Banks Are Actually Scared Of

Book Metadata:

• Title: Blockchain and Banking: How Technological Innovations Are Shaping the Banking Industry
• Author: Pierluigi Martino
• ISBN: 978-3-030-70969-3