Anyone who has been paying to the financial ecosystem over the past few months will have noticed how a lot of institutions are turning to the blockchain for additional security. That statement was only reinforced by a recent Bloomberg article, as the mounting fraud in traditional finance needs to be addressed sooner rather than later.
Fraud Forces Blockchain Solutions
For the longest time, banks and other financial institutions have opposed the idea of using Bitcoin or its technology. However, that situation came to change over the past two years, as many financial institutions are turning towards blockchain technology all of a sudden. Moreover, the traditional financial system keeps seeing fraud rates go up, and there is no solution in sight.
Some of the major financial players in the world of finance have chalked up significant losses due to fraud over the past 24 months. Standard Chartered Plc lost US$200m from a fraudulent transaction through Qingdao two years ago, which has forced the institution to come up with a new solution. By partnering with DBS Group Holdings Ltd, that solution takes the shape of blockchain technology.
Standard Chartered’s Lum Yin Fong explained the dire situation as follows:
“Because there is no common platform for banks to screen transactions financed by other banks due to confidentiality concerns, there is a possibility that customers may capitalize on this information-sharing gap to obtain financing from multiple banks using the same invoice.”
Both companies trialed this blockchain solution at the end of 2015 under the TradeSafe moniker, and a shared ledger containing 60 mock invoices was created. Although very little has been heard from this project ever since it appears the pilot program was quite successful. However, these institutions are not looking for a decentralized approach as seen in Bitcoin technology.
According to many financial industry experts, banks will have to collaborate and form a central registry. While most of the financial institutions are convinced blockchain is the future, a centralized solution will not solve most of the problems. At the same time, all of the participants see the technology as a way to conduct global payments, which will benefit everyone involved.
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