Banks have not prepared to retain control of customers and merchant payment interfaces in the face of blockchain or distributed ledger, according to managing consultant firm Bain & Company white paper . Such technology removes intermediaries, simplifies counterparty connections and records data in a tamper-proof manner. It also promises faster speed, more transparency and efficiency for payments.
Bitcoin, despite some flaws, demonstrates these possibilities and has attracted a surge of investment. Ripple Labs , a blockchain startup, holds a seat on the Federal Reserve Faster Payments Task Force.
Bain & Company, a financial consultantcy, interviewed more than 50 venture capitalists, bankers, payment association executives, bankers and startup CEOs. The interviewees indicated that banks are positioned to address the changes caused by distributed ledgers, but the situation is complicated.
The paper attempted to clarify the different ways banks are responding to distributed ledgers and the opportunities they offer.
Distributed ledgers will determine successes and failures within the banking industry, the paper noted. Distributed Ledgers Tap Existing Systems
The paper gave an overview of distributed ledger technology. It noted they combine existing technologies in novel ways. These include: The blockchain is a secure record of transactions collected into blocks grouped in chronological order and distributed over different servers to provide reliable provenance.
Digital signatures are digital keys that authorize and check transactions and identify the initiator.
A consensus mechanism consists of techniques that ensure participants processing transactions agree on which ones are valid. Digital currency is, in some implementations, a cryptographic token representing value. Central banks could create digital currencies. Distributed Ledgers Vary Distributed ledgers’ features vary. Some, like bitcoin, permit any participant to validate transactions. Others, like Ripple, limit permission to a group of trusted parties.Distributed ledgers will follow two paths. One will be the development of systems focusing on global payments. The other […]
