The Euro Banking Association (EBA) believes that distributed ledger technology could streamline processes in the industry as well as assist with regulation adherence.
Visiting brick-and-mortar banks or financial institutions can be soul-crushing. You need to get there early to ensure that you’re first in line when those doors open. If you’re not, you could be in for a long wait. Depending on your reason, you may also need to be prepared to fill in mounds of paperwork.
Perhaps you thought you’d phone instead to resolve your problem. There are, however, still processes that need to be followed which could result in you being glued to your phone for hours answering those infamous “security questions”. These are exactly the scenarios that disruptive technology is trying to eliminate, and the Euro Banking Association (EBA) seems to agree with this assessment.
The Benefits of Distributed Ledger Technology
Finextra recently reported that the EBA believes that distributed ledger technology (DLT) could make a positive impact in Know Your Customer (KYC) processes and the data management thereof. A report by the association has highlighted the fact that current processes most likely cost financial institutions more money and also result in a lack of customer satisfaction.
The chair of the EBA Cryptotechnologies Working Group, José Vicente, elaborated:
DLT-based data sharing within a financial institution has the potential to improve data integration and error rates. If each department has a shared, uniform view of KYC attributes, customers will no longer have to re-submit KYC documentation for each additional service. DLT-based data sharing could even be extended to include multiple financial institutions.
While this is, of course, good news for customers, DLT can provide even more in the form of streamlined reporting processes and can even assist is easily adhering to regulations. Vicente explained:
Financial institutions are subject to multiple reporting requirements to various authorities at various frequencies. DLT-based reporting systems can be designed to be compliant with regulation from the outset and help make these reporting processes more efficient and fault-proof for the benefit of both financial institutions and regulatory authorities.
Blockchain is the Key
Blockchain technology comes out tops when it comes to record-keeping as all transactions are immutable, secure, and permanent. This is is exactly what is needed in most companies that are reliant on paper-based processes. Documents could get lost, mistakes could get made and fraud could occur, especially in the financial industry. However, blockchain can also be used in other sectors like housing and even retail.
It does seem to be making an impact in finance though with the World Bank Group viewing the technology as the potential key to global financial inclusion.
Do you think that distributed ledger technology is the future of finance? Let us know in the comments below!
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