Blockchain technology is already producing tangible solutions for banks. Here are three live applications of blockchain that are worth getting to know

Promising vast improvements in security, efficiency, and transparency, blockchain has been heralded in many ways: including as the basis for a new information revolution.

Already there are proven, live use cases for blockchain that banks can evaluate for use today. These include simplifying the communications chains in cross-border payments, speeding up clearing and settlement processes in domestic transactions, and managing a new breed of capital markets transactions.

Before we get to that, let’s refresh ourselves on the basics.

Blockchain: The Perfect Encoder?

Blockchain allows for multiple parties to maintain a record of activities – what’s known as a distributed ledger. And by cryptographically coding each transaction, historical blockchain records are virtually impossible to alter.

With these features, blockchain technology is a powerful tool for projects that bring together multiple entities with potentially competing interests. Having a distributed, immutable record of each transaction means that there’s no need for a single entity to act as gatekeeper or authenticator of the information.

Additionally, smart contracts can be used on top of a blockchain to automatically execute on specific terms and conditions, offering an impressive administrative layer to the technology.

Given these attributes, blockchain has been touted as a powerful new tool for everything from digital identity to insurance processing. Here we take a look at three specific, tested use cases for blockchain in banking.

Blockchain for International Payments

Cross-border payments have long been derided as cumbersome. They have required multiple intermediaries between parties, making it difficult to know the full cost or timing of a transaction from the outset.

Blockchain changes that, by allowing banks in different countries to deal directly with each other to transfer funds. In Latin America, banks including Scotiabank and Banesco have tested out the technology and say it offers huge improvements to the speed and transparency of international payments.

Globally, JPMorgan is developing a global cross-border payments network based on Quorum, a permissioned blockchain created by the bank. More than 400 banks globally have signalled their interest in working with the Interbank Information Network, which aims to cut friction, intermediaries and processing time in cross-border payments.

Blockchain in Domestic Payments

International payments are particularly ripe for disruption, but banks have also used blockchain to improve domestic transactions. Just as with cross-border transactions, blockchain helps track and record domestic payments between accountholders at different banks.

Argentina’s Central Bank tested out the technology recently in a proof of concept together with major retail banks, and Colombia’s local clearing house is rolling out a blockchain-based system for settling and clearing domestic transactions.

While domestic payments typically don’t rely on as many intermediaries as an international transfer, blockchain still offers potential for more efficient, faster and transparent settlement and clearing at the local level.

Blockchain in Capital Markets

Banks are also finding potential for blockchain to make capital markets transactions more efficient. Indeed, some predict that a move toward so-called “security tokens” will grow into a major trend in the years ahead.

Security tokens are treated by regulators, for the most part, as securities, but they are distributed and traded over a blockchain. Deloitte forecasts that security token offerings will cut the costs of launching new primary market transactions and streamline compliance processes.

Brazilian bank BTG Pactual last year tried out the technology. Its security token offering REIT BZ allowed international clients to invest in a real estate investment vehicle using cryptocurrency. The bank said at the time that blockchain helped make the distribution of an otherwise traditionally structured asset more efficient.

While it is true that blockchain is still in its early stages, these examples highlight its impressive future potential.

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