Case Studies for Applications of Blockchain to Financial Services

Although the term “Blockchain” has grown in the popular imagination in the last few years, the technology itself is just 10 years old, having been developed in 2008.

Currently, the financial services sector offers the strongest use cases for Blockchain technology, although applications of it are growing rapidly in other industries such as transport and agriculture; and professions such as accounting, audit and the law.

1. What is Blockchain?

Many people confuse Blockchain with Bitcoin or digital cryptocurrency. This is not accurate, as cryptocurrency is the best-known deployment of the technology. Blockchain is so much more.

It is defined by Don and Alex Tapscott, authors of Blockchain Revolution (2016), as follows:

“The Blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.”

In practicality, Blockchain is a continuously growing list of records, called blocks, which are linked and secured using cryptography. Each block contains typically a hash pointer as a link to a previous block, a timestamp and transaction data.

Essentially, information held on a Blockchain exists as a shared and continually reconciled database. By design, Blockchains are inherently resistant to modification of the data contained in the block. By storing blocks of information that are identical across its network, the Blockchain cannot:

• Be controlled by any single entity
• Have any other than one “single source of truth”
• Have no single point of failure

As such, all problems experienced will come from fraudulent or criminal intent and human error, not design flaws in the underlying structure.

2. Why is Blockchain Used in Financial Services Rather Than Other Technological Solutions?

Many of the industry’s processes are overdue for an upgrade or, in some cases, complete replacement in order to withstand new volumes, hacks, and security threats. Blockchain is far more impregnable and recoverable as no centralized version of this information exists.

Transfers facilitated by central authorities such as banks and clearinghouses have not changed in the last 150 years! An international transfer can still take as long as five days to settle, entailing risks like credit risk, exchange rate risk, etc., and the industry needs to reduce heavy transaction fees and transaction times. Blockchain can make these transfers visible securely immediately, which other technology cannot.

In the future, people are going to make a lot of smaller payments. That’s going to increase economic activity. That, in principle, makes a larger pie with lower fees, higher volumes and a demand for technology that supports it (such as Blockchain).

Blockchain will also enable further disruption of the traditional banks by fintech and non-bank tech players. New entrants, free of legacy problems, could utilize the Blockchain to create a radically cheaper platform for innovation. Banks need to start work with Blockchain technology now in order not to be disintermediated by new entrants.

In terms of specific examples of Blockchain applications within banking, several use cases exist already. These include KYC, Payments, and Trade Finance, and many banks are already piloting Blockchain in these areas.

2.1. KYC and identity management

Know your customer (KYC) requests can cause delays to banking transactions, typically taking days and sometimes weeks to complete. Current KYC processes also entail substantial duplication of effort between banks (and other third-party institutions). While annual compliance costs are high, there are also large penalties for failing to follow KYC guidelines properly.

The solution? Banks such as OCBC, HSBC, and Tokyo Mitsubishi are already trialing a consortium in Asian markets that operates on a distributed ledger platform.

The KYC Blockchain will enable structured information to be recorded, assessed, and shared across this network using advanced cryptography. With the customer’s consent, banks will be able to collect, validate, and share data efficiently and accurately.

2.2. Payments 

The existing international payment system has always been routed through banks and central banks, a process that was first put into place in the 1970s and 1980s. Apart from speeding up money transfers, Blockchain could also help banks to operate continuously, 24 hours a day. This is now increasingly expected by customers who want an omnichannel banking experience at any time, day or night.

The solution? Interbank payments can be made more efficient by using distributed ledger technology.  

In Singapore, a consortium of local banks plus the Monetary Authority of Singapore (MAS) and BOA Merrill Lynch are prototyping new models to implement decentralized netting of payments encrypted to preserve privacy.

Decentralizing the payments queue and consolidating or “netting” the payments used to expose details to third parties in the settlement process. Blockchain has now alleviated that threat.

2.3. Trade finance

The trade finance business includes multiple trading partners and huge amounts of manual records handling, checking and paperwork. This creates delays, duplication and fraud and high levels of inefficiency. It is a sector ripe for a Blockchain revolution.

The solution? IBM, UBS, and several other international banks (including Caixa, Commerzbank, and Bank of Montreal) have formed a trade finance consortium to create a global trade finance platform based on Blockchain.

Blockchain will be used to digitize sales and other legal contracts, allow the location of goods to be monitored and facilitate settlement in close to real-time. This provides a mechanism to link banks, importers, exporters, government agencies, shipping companies, transport operators and insurers.

Blockchain is not all that new, however, it is now starting to prove itself beyond just cryptocurrency. It is likely to disrupt financial services first by making existing processes more efficient, secure, transparent, and inexpensive.

Blockchain, then, could be the technology that enables banks to introduce new products and services quickly and cheaply. Finally, it could also enable banks to provide a seamless customer experience, transparency, and security at present we can only dream of.

Read more: Blockchain Software Development Company: A Comprehensive Guide

Conclusion: The Future of Finance Lies in Blockchain

The integration of Blockchain technology into financial services is no longer a question of if, but how fast. As demonstrated through real-world applications in KYC, payments, and trade finance, Blockchain is already streamlining operations, cutting costs, and enhancing transparency across the sector. Its decentralized, tamper-resistant design makes it particularly well-suited to solve the longstanding challenges of trust, inefficiency, and siloed data in the industry.

For financial institutions, embracing Blockchain is not merely an innovation play, it’s a strategic imperative. As fintech disruptors and agile tech players adopt Blockchain to build faster, cheaper, and more secure platforms, traditional banks must adapt or risk becoming obsolete. Those who move early can position themselves as leaders in a new era of digital finance, offering customers faster transactions, better compliance, and a significantly improved experience.

In short, Blockchain is not just revolutionizing how financial services operate, it’s redefining what’s possible.