Accept It: The Blockchain Will Be Part of Your Bank's Business

You've heard the hype.

But you recognize that most of it is coming from people with a vested interest in seeing blockchain technology become the big thing that they think it will be — Blythe Masters, for one.

The JPMorgan Chase veteran is the chief executive of the blockchain technology company Digital Asset Holdings. So you have to expect her to talk up the blockchain as she has, touting its potential to change the way the financial world operates and emphasizing how it can reduce risk, improve efficiency and ultimately provide better customer service.

Among traditional bankers, some might agree there's great potential in technology that facilitates an immutable record of transactional data.

Yet many remain skeptical about anything associated with bitcoin. Eyes glaze over at the details of how it works. Applications for the average bank seem to be distant still.

If this is how you think about the blockchain — that is, when you think about it at all — expect to be paying far closer attention soon. "The biggest idea in banking right now is blockchain technology," says Brad Leimer, the head of innovation for Santander Bank.

Leimer is quick to say he's not a bitcoin, blockchain or distributed ledger technology expert. But he considers the blockchain "big news" that banks of all sizes should care about. "It has fundamental properties capable of changing just about every financial transaction that people do today," he says.

A recent post on Simon Taylor's Innovation Blog — talking about the stages of blockchain understanding — is one Leimer relates to personally. Leimer says Taylor is right when he says people go from being dismissive of bitcoin as a currency, to curious about the underlying technology, to incredibly excited about the use cases.

"I've seen not only myself but my company go through that in the last 12 months," Leimer says.

When he started in his current role just over a year ago, he asked what Santander was considering doing with the blockchain. The answer was not all that much, "because it's connected to bitcoin, it's sensitive politically, and it's sensitive in regulatory circles." Now it's working with fintech startups on a variety of ways to use the technology, with trade finance being one of the areas Leimer is most excited about.

"2015 was the year that bitcoin was pulled out of the blockchain discussion and it became a technology," he says. "In 2020, we need to be actively leveraging this technology in day-to-day use."

The value of the technology has to with how it enables new forms of money movement and data storage that is cryptographically secure, he says. "Data and money have always been associated, but they've never been able to be encapsulated together. That really starts to make you think, 'What can that actually do?'"

One idea is a smart contract between two corporations that allows the release of a portion of funds whenever certain parameters are met in the shipment of goods.

As more data is stored via blockchain over the next decade or so, other possibilities open up, Leimer says.

"We're talking about mortgages that can be originated and closed within days, and potentially hours, if all of the data that was required for a mortgage was on the blockchain — searching for the title, checking that there are no liens against the property, all of the things that make mortgages take time," he says. "If all of the data was on the blockchain, it could simply be tapped into."

Leimer says even CEOs at community and regional banks should be learning about the blockchain and talking to their technology providers about it. "The question they should be asking themselves is, 'Are we missing out by letting the biggest banks develop this new paradigm?'"