Blockchain has begun disrupting various business processes, governance systems, and value exchange. However, the sectors that are terrified the most with this technology is Banking and Fintech industries.
Only ten years old, the distributed ledger technology that empowers cryptocurrencies has demonstrated how it can revolutionize the banking architecture, propose faster and cheaper global trading gateways and eradicate third parties in numerous industries. Thus, making the conventional banking system seem archaic.
However, the finance and banking industries are also not here to sit idle either. According to Stewart Brand,” if a new technology rolls over you, if you’re not part of the steamroller, you’ll become a part of the road.” Banks seem ready to join the bandwagon to discover blockchain applications in banking so they can keep their financial operations relevant.
But with the embracement of blockchain by banks, the future of finance, and banking lie in the hand of DLT (distributed ledger technology) startups. The startups like SWISTs, VISAs, and future banks are leveraging existing financial infrastructure to develop cutting-edge decentralized banking and finance systems.
At the core of this new banking revolution, there are two prominent organizations, Ripple and Stellar.
These two blockchain companies, Ripple and Stellar are hell-bent on merging DLTs (distributed ledger technologies) with existing financial architecture.
Promoted as the “future of finance and banking,” Ripple and Stellar are creating blockchain based financial systems to address the problems the industry faces today.
When it was launched in 2013, Ripple’s goal was to develop scalable and low-cost financial processing solutions for banks globally.
Surprisingly, after one year, the blockchain startup bagged Fidor Bank as its first client.
The Munich based bank employed Ripple’s payment processing system for its regional and international customers.
Since then, Ripple Foundation has been collaborating with numerous financial entities and banks around the world to reform this industry.
Ripple has flown across the Arabs where it got the approval of an international payment deal with UAE Exchange through decentralized cross-border payments solutions.
Also, the Saudi Arabia Monetary Authority, Arab’s central bank, has also permissioned Ripple to enable regional banks to beef up their payment processing capacities (domestic or international) through xCurrent, a Ripple’s blockchain based, cost-effective, and transparent remittance settlement solution.
Ripple’s journey hasn’t stopped there. In this financial industry, it has cut across every part of the world.
In November 2018, Ripple came into partnership with one of the prominent banks in Brazil, Bradesco. The cooperation enables the bank to execute seamless financial transactions within its 5,300+ branches and over 38,000 ATMs. The partnership also brings on the table the Brazil-Japan cross-border payment corridor, with industry giants like Mitsubishi and MUFG entering the pact.
In October this year, 60 Japanese banks controlling over 80% of banking assets in the country signed on to use the Ripple’s Money Tap mobile app.
It seems like, on a wider scale, Ripple is being tagged as the blockchain technology gradually taking over SWIFT and VISA, which is significant with the company’s rapid adoption by concurrent financial institutions.
At the beginning of 2018, Ripple had partnered with 75 banks which were using its various DLT solutions. Other prominent banks using Ripple include IndusInd Bank, PNC Bank, Banco Santander, BBVA, Akbank, Bank of America, and Standard Chartered among many others.
The bottom line is Ripple is not the only blockchain startup heading along this path.
Incorporated in 2014, Stellar is a blockchain technology-based platform. It aims to provide everyone with consequential financial solutions anywhere.
Some of the principals Stellar follows are the advancement of global financial literacy, inclusion, and access by giving cross-border, cost-effective, and P2P (peer-to-peer) financial transactions.
As an institution hinging on the distributed ledger technology, you may think that Stellar moves would put traditional banking out of business. But this is not the case in reality. The Delaware-based company is looking to work together with the traditional financial and banking system.
Instead of eliminating the processes and reinventing the wheel completely, it is focusing on collaborations with existing banks to realize its goals.
During 2016 Exponential Financial conference held in Johannesburg South Africa, CEO of corporate and investment banking at Barclays Africa Stephan van Coller discussed how the Finance Giant is piloting a distributed ledger system by utilizing the Stellar’s payments rails. The pilot program involved students of age group between 16-18 and aimed to culminate research into how smartphones can be used as everyday payment solutions for the rapidly growing African population.
With that said, nonetheless, this is just the beginning of Stellar’s voyage into traditional banking and finance.
Recently, in October 2017 Stellar partnered with IBM to create a Blockchain World Wire (BWW). It’s a distributed ledger system aimed to provide interbank transfers and cost-effective global payment systems.
Since the launch, BWW is being considered as a SWIFT replacement in the global payment scene by some industry enthusiasts. Not only this but through the Deloitte Digital Bank, Stellar also partnered with this big player to create a state-of-the-art, cost-effective banking system for the financial domain. But it can be called just a tip of the iceberg.
What established Stellar’s place as a Blockchain company penetrating through the traditional banking is its acquisition of Chain. Chain is a San-Francisco based blockchain based startup. Its work is to build distributed ledger technology solutions for the financial system.
And what makes it a significant acquisition is that Chain is not a usual blockchain startup. Apart from its powerful presence in this industry in a few years, Chain boasts prominent investors like Citi Ventures, Visa, and Nasdaq. Thus, together with the for-profit arm of the Stellar Development Foundation, it’s now called Interstellar.
Stellar’s aims to create cost-effective, high-performance, and modernized financial systems for both individuals and businesses. But with a slightly different approach. Instead of reinventing the wheel through decentralization, Stellar is trying to work together with the existing financial system to develop decentralized solutions that can serve the needs of today’s modern consumer.
Money is getting disrupted, so is the value exchange. And the asset digitization is gradually taking over. So, it’s time to watch how would the future bank and financial system work after the rapid adoption of Ripple and Stellar.