Blockchain Isn't The Magic Pill To Banking Ills


With the market cap of digital currencies like Ether, Litecoin and Ripple surging in 2017, pundits are already speculating that “2018 will see many more cryptocurrencies double in value.” However, while we all know about these incredible valuations, the fakes are bringing down the credibility of the industry and threatening the promise that it holds. From ICOs with nothing but a whitepaper as proof of concept to debacles like Hyperledger, the question for 2018 is this: Just how reliable are technologies like blockchain to the future of finance?

Banks aren’t ready for blockchain—yet.

To me, it’s clear that blockchain isn’t the future—at least not for banks. Mired in legacy systems that need to be upgraded to the technology of the future (think cloud) and facing a mountain of compliance issues, banks need to think twice before investing in unproven technologies. That means that before banks put resources behind bots, blockchain, and other hot emerging innovations, they need to make sure they are first investing in the kind of fundamental innovations that can deliver more immediate value for their customers and provide a foundation for those breakthroughs to come.

What are the core pillars of service that business customers care most about, and what can banks do to set themselves up not just for the future but to last? Should banks invest in fixing faulty architecture and catch up with a mobile-first strategy in our increasingly digital and cashless society? Or should they direct their efforts elsewhere?

As the CEO of a tech company, I’ve always taken a critical lens to any technology that claims to solve all of the problems of any industry—nevermind an industry as highly regulated and with as many complex needs as banking. Fintech emerged to help bridge the gap between consumer expectations and the issues plaguing financial institutions because of their dated infrastructure.

Multinational banks are already investing in blockchain, which could eventually help them eliminate an estimated 54 billion in back-office costs. However, few banks are currently set up to take advantage of blockchain technology in the near-term. Investing in blockchain also presents a number of challenges for banks, including lack of market maturity, an inability to scale and a slow adoption rate.

AI is meaningless without better customer service. 

Like blockchain, artificial intelligence (AI), while promising a lucrative future, is still in the early development stage. While banks have used various forms of AI for decades (such as computer automation for fraud detection), banks are reticent to use AI for more complex matters, like robo-advising. For example, it’s easier to deliver a bad bot than a good one, as Microsoft’s Tay fiasco has shown. And, a poor customer experience can make banks look out of touch with the very customers they’re trying to engage and impress. It takes a considerable amount of work and time to develop AI correctly, train systems, and gain customer trust and adoption. After all, these bots aren't just doing your personal shopping, you're trusting them with the keys to your customers' finances.

What technology should banks invest in today?

As I mentioned before, banks risk losing customers in the short term with unproven technologies. Rather than jumping on the blockchain and bot bandwagon, financial institutions have the opportunity to seize the moment and improve the core pillars of service that their business customers care most about now.

Just like consumers, business customers want the easy access and flexibility of accessing their information digitally, anywhere, on any screen size and without any hassle. They want to have a wealth of options at their fingertips, as technology has made it easier for businesses to switch banks based on the promise of a better deal or improved customer experience.

According to a report by PwC, “We are now at a digital tipping point, with rapid technological advances enabling all aspects of banking to be conducted online. And customers’ expectations are evolving in tandem. They want to transact at their convenience, with information and advice at their fingertips.”

A core pillar of customer service that business customers are looking for is a digital-first approach to banking. Business owners want improved customer support and a variety of great products and services to choose from. But it’s not just a digital focus or choices that are important.

Security is a key concern for business owners. After all of the recent data-breaches, customers are also looking for banks that they can trust, equipped with the technology and team to keep their information safe.

Another fundamental that banks are overlooking is that business owners don’t want their banking needs treated any differently than consumers. As Ben Little, the co-founder of innovation consultancy recently told the Guardian, “Entrepreneurs want a bank that behaves as they do, and works at the same speed too—both from a personal point of view and business point of view.” 

Entrepreneurs, consumers, and business owners all want the same things from banks: instant digital access, security, reliability, and mobile responsiveness. So, before banks consider investing in bots, blockchain, and other hot emerging innovations, they need to make sure they’re first investing in the kind of fundamental innovations that can deliver more immediate value for their customers and provide a foundation for those breakthroughs to come.


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Originally Published on Forbes Finance Council.

March 1, 2018
René Lacerte
CEO and Founder,
René founded in 2006, bringing with him more than 20 years experience in the finance, software and payments industries. He is a fourth generation entrepreneur and holds a MS in Industrial Engineering and a BS in Quantitative Economics from Stanford University.