Can Blockchain Disrupt Banking?

Kash Team
8 min readSep 20, 2021


(Guest article from Erna Clayton)

The banking industry, as we have known it for many years, is undergoing a dramatic shift, propelled by new technologies. The most significant is blockchain, which is expected to profoundly alter how financial transactions are conducted today. This technology is expected to have a significant impact on how commercial banks conduct business in the future, empowering new business models, delivering new value propositions, and solving lengthy challenges while providing much-needed reliability and control in transactions involving multiple parties and vast amounts of data. Despite the fact that this technology is still in its infancy, blockchain is hailed as a game-changing, revolutionary breakthrough with the potential to totally transform the banking scene in the years ahead. Others go so far as to say that blockchain will render banks obsolete completely. There are countless blockchain jobs available in the banking industry and a few banks have already started using blockchain.

What disruption means?

Since the term “disruption” was coined in the 1990s, it has come to signify so many different things that it has lost its original meaning. Disruptive and/or innovative are terms used to describe something that is “new.” In 1997, Clayton Christensen, a professor from the United States, coined the term “disruptive innovation.” Any invention that changes a complicated, expensive item as one that is simpler to use or more economical than the most convenient option.

Disruption consists of three components: efficiently responding to competitors, identifying new growth prospects, and enhancing customer knowledge.

A disruptive firm will most likely begin by pleasing less demanding clients or by developing a market where none previously existed. As a result, disruption occurs when mainstream customers begin to accept the newcomers’ offerings in large numbers. It is, however, extremely impossible to predict what actual disruptors will be. The procedure can take a lengthy time. It could take years for the actual effects of disruption to become apparent in the market.

Though technical developments are the most well-known examples of disruption, it is not the only source of disruption. Disruption isn’t required for every profitable business or product. Disruption, on the other hand, occurs when businesses discover a more efficient, better method of doing things that draw customers.

Why is blockchain considered disruptive for banks?

The solution to this question can be found in three of a blockchain’s in-built properties: decentralisation, distributed ledger, and immutability. These are not the same as those of banks, which are centralised institutions.

Decentralised network

Blockchain is a peer-to-peer network that runs on a decentralised network. It manages all activities in the same way as a bank does, but without the need for a central authority to oversee all data. As a result, it may eliminate the middleman, returning authority to the asset owner (data or tokens carrying some financial value). All data is kept in blocks across the network. These blocks, which are time-stamped and connected to all previous and present transactions, are permanently preserved and cryptographically secure, balanced and updated. From here we understand what is chainlink and how it works.. Blockchain minimises the risks associated with data maintained centrally by storing it across its network.

Distributed ledger

A distributed ledger allows several parties to share a log of activities — such as arbitrary data or essentially anything of value. The capacity of blockchain to generate trust and transparency among all parties using it is what makes it so significant. Since the ledger is shared among all transaction participants, it exists in numerous locations at the same time. To provide transparency and avoid a single point of failure, each computer in the distributed network keeps a copy of the ledger, and all pieces are updated and validated at the same time. This makes manipulating entries or tampering with data without the knowledge of the other parties extremely difficult.

Immutable records

Its immutability is a third distinguishing feature. Blockchains are inherently resistant to data alteration by design. When it comes to validating new blocks, all blockchain networks use the same protocol. Once the system is set up with the initial standards, no adjustments can be done. Once logged, the data in any specified block cannot be changed without affecting all following blocks, which necessitates network majority consensus.

Where will blockchain have the most impact on banks?

Though blockchain is said to have an effect on every aspect of the banking markets, the most disruptive utilisation incidents are in cross-border payments and money transfers, stock trading, trading and settlement, trade finance and supply chain finance, regulatory ensuring compliance, and smart contracts. It is evident, though, that as the technology advances, there will be a plethora of new applications for blockchain technology.

  • Cross border payments

Payments are emerging as the first and principal blockchain use case for any banking and/or financial system, which is expected. Due to the necessity for bank branches or other middlemen, cross-border transfers are now a time-consuming and costly operation.

Since it does not require third-party authorization, blockchain is a simple and safe solution. By eliminating many of the conventional middlemen, the time-consuming and expensive process of cross-border payments is eased, greatly speeding up the process and at a relatively lower cost banking system.

  • Share trading

Implementing blockchain for stock and share purchases and sales could provide a number of important advantages. Several third parties, such as brokers, CCPs, CSDs, and exchanges, are involved in share trading, making it a time-consuming procedure.

Due to the decentralised nature of blockchain technology, all of these intermediaries may be eliminated, allowing trading to take place on computers around the world. By removing some of the middlemen from the share trading procedure, the settlement process is sped up and trade accuracy is improved. Trading activities on the blockchain lowers information redundancy and thus increases accuracy.

  • Clearing and settlement

Global cash settlement in numerous currencies for fixed income, equities, and derivative products is slow, costly, and complicated. The settlement takes several days due to the huge number of parties involved.

Blockchain provides fast settlement by removing a huge number of intermediaries, resulting in significant cost savings.

  • Trade finance

Numerous trade finance activities still require a significant amount of paperwork, like bills of lading, invoices, and letters of credit, among other things. All trading chain parties must have their own system for all transaction-related documents, which must be reconciled on a regular basis. Therefore, it is a time-consuming task.

By eliminating time-consuming documentation and bureaucracy, blockchain-based trade finance can simplify the entire trading process. It removes the necessity for several copies of the same document by combining all relevant data into a single digital document that is updated in real-time and accessible to all network participants.

  • Syndicated lending

Syndicated lending is another area of finance where blockchain could be transformative. Because there are numerous parties involved, standard bank processing of syndicated loans might take several days. Given the necessity to address the challenges of KYC and AML rules, this is a wise decision.

This procedure can be improved and made more transparent using blockchain technology. The use of smart contracts for syndicated loan processing can provide a number of benefits to syndicate members. Exchanging information via blockchain can benefit each participating bank. This reduces the cost of complying with regulatory standards for syndicated lending while also saving time.

  • Digital identity verification

The digital identity verification procedure is another area where blockchain might greatly enhance customer satisfaction. Online financial transactions necessitate a number of procedures, including face-to-face verification, authentication, and authorisation, among others. Each new service provider must go through all of these stages.

Identity verification may be securely re-used for various services thanks to blockchain. Individuals get to choose how they identify themselves and who they disclose their identity with on the blockchain.

They must still enrol their identity on the blockchain, but they will not have to do for each and every service provider if other providers are also blockchain-based.

  • Accounting data reconciliation

Some financial organisations have out-of-date databases and reporting systems, which are inefficient. The method in this financial data is kept and transmitted within banks, and between banks and corporates, which is destined to be revolutionised by distributed ledger technology. When blockchain is fully integrated into banks’ daily operations, the concept of semi-manual data reconciling should become outdated. This is because blockchains function as a secure and immutable database.

  • Smart contracts

Smart contracts are yet another approach to profoundly alter how businesses are conducted today. The use of these contracts will disrupt bank activities such as lending, deposits, treasury, investment advising, business intelligence, regulatory compliance, transactions, and remittances.

Blockchain technology in banking will transform the way information and money are transferred in finance by utilising smart contracts (and in many other industries). Smart contracts enable the entirely decentralised operation and automation of corporate processes, allowing shared standards of engagement, conduct, and business processes to be automated and enforced across the ecosystem.

Future banking eco-system

The banking ecosystem of the future will be considerably different from what we have now. This eco-system will be one of open innovation, cooperation, bank-fintech alliances, and heightened rivalry, sparked by blockchain technology and its disruptive nature. While middlemen will be much less necessary, there will be a rising need for collaboration between banks and other stakeholders in order to maximise the benefits of this and other emerging technologies. Newcomers, on the other hand, will face more intense competition.

The blockchain-based bank ecosystem will be one of intense collaboration, with not only other banks but also with numerous third parties in the financial chain, in an evolving global banking environment. Whether it’s a payment processor, a financial startup, or a creative app developer, the third party is important. Their ability to collaborate in the future will be determined by their desire to do so, even in the face of apparent threats to their main activity. Banks don’t have much of a choice on the matter if they want to survive and thrive. The major established banks may be able to unlock fresh waves of fintech innovation as a result of open banking by enabling a broad variety of external parties to safely interface with their core banking operations. These collaborations will take the form of worldwide networks, allowing for frictionless transactions and making the most of blockchain technology. Even as the disturbances persist, the ecosystem will witness more cooperation between financial institutions and fintech firms, as well as the formation of platform companies to satisfy their clients’ shifting needs. Financial institutions can provide an environment for proof of concept and scale, whereas fintech businesses have the advantage of innovation. While it may seem counterintuitive for banks to promote new services outside of their direct control and balance sheets, the risk of stifling outside creativity and innovation is greater. The majority of fintech start-ups lack a lot of characteristics that traditional banks have. However, while the disruption possibility for Fintech start-ups and other non-bank service providers is enormous, they will need to figure out how to scale their businesses while dealing with increased regulations, higher costs, and bigger infrastructures if they are to truly replace traditional banking in the long run.


Although this disruption caused by blockchain technology is still in its early stages, many experts believe it will accelerate quickly. As a result, the banking industry will undergo significant changes in the next years, with new firms entering the market. In the short run, blockchain may eliminate some roles in financial services.

Although the financial world is ecstatic about blockchain, it will take several years for the technology to become a mainstream financial paradigm. As a result, disruption will occur gradually but steadily. Banks have time to plan and modify in the meanwhile so that they might have a “second life” in the blockchain world.

Nevertheless, the way blockchain disrupts the traditional financial services industry is not clear, and it can happen in both obvious and less obvious ways. The destiny of the financial services industry will thus be determined by how diverse players, such as banks, use technology and communicate with one another.

However, as financial institutions completely adopt this technology, we should see the savings in the form of lower fees for consumers, resulting in a more promising customer experience from banks.

(NOTE from Kash Team: If you’d like to write a guest article for our blog, please email . We love hearing from others ranging from researchers to students to crypto enthusiasts as we build our community together!)



Kash Team

We're, the very first third party ecosystem partner invested by Terraform Capital. We're excited to be bringing the Anchor Protocol mainstream.