The Threats Banks Are Actually Scared Of
Previous: Banks vs. Blockchain: Friends or Foes?
Yesterday, we talked about how banks are using blockchain to get faster. But today, we’re looking at why they’re still sweating. Pierluigi Martino points out that while the tech is a great tool, it’s also a massive threat to their bottom line.
The $500 Million Headache: KYC
If you’ve ever opened a bank account, you know the drill: ID, proof of address, more ID, wait three days. This is called KYC (Know Your Customer).
Big banks spend between $60 million and $500 million a year just on this process. It’s slow, it’s expensive, and honestly, it’s annoying for everyone.
The Blockchain Fix: Imagine a shared, secure database. Once one bank verifies you, every other bank can see that verification (with your permission). No more repeating yourself. It’s faster for you and saves banks a fortune.
The $380 Billion Opportunity
Here’s a crazy stat: there are about 1.7 billion people in the world who don’t have a bank account.
Why? Because traditional banking is too expensive for them, or they don’t have the “right” ID. Blockchain changes that. It makes it cheaper for banks to serve these people. Bringing them into the global economy could generate up to $380 billion in new revenue for the banking sector every year.
So, why aren’t we there yet?
If it’s so great, why hasn’t it happened? Martino lists three big reasons:
- Regulation: Banks have to follow strict rules to stop money laundering. Blockchain is still a bit of a “grey area” here.
- Privacy: On a public blockchain, everyone can see everything. Banks (and you) probably don’t want your transaction history being public.
- Interoperability: Different banks are building different systems. If they don’t talk to each other, the whole “shared record” idea falls apart.
The Real Kicker
For now, blockchain is more of an opportunity for banks than a risk. The technical and legal hurdles are actually acting like a “shield,” keeping the disruptive startups at bay while the big banks try to figure out how to use the tech themselves.
But that shield won’t last forever.
Tomorrow, we’re looking at how the actual business models of banks are changing. It’s not just about doing the same thing faster—it’s about doing something completely new.
Next: Rebuilding the Bank: New Business Models
Book Metadata:
- Title: Blockchain and Banking: How Technological Innovations Are Shaping the Banking Industry
- Author: Pierluigi Martino
- ISBN: 978-3-030-70969-3