There are two main reasons why blockchain in banking will likely work out
First of all, let’s remember when blockchain was invented. It was 2008, and for years people barely knew about it. Crypto.com estimates that 741 million people worldwide owned cryptocurrency by the end of 2025, which shows how far the technology has come. If we look back in history, just 13 blockchain projects raised $365M in 2015, while in 2016, they had amassed no less than $1B.
Nevertheless, not all market players are happy with such a rapid pace of development of this technology. The new technology offers a lot of innovation, as well as fundamental changes too. The banking sector, for instance, expresses concerns, because it is not entirely ready for dramatic changes. The interesting thing is, the majority of financial industry leaders have no doubt blockchain technology will have a positive impact on the industry. They just are concerned about the speed of progression.
Before we start, let’s find out what blockchain is, and how it works.
What Is Blockchain in Banking, and How Does It Work?
Basically, blockchain is a combination of two words – “block” and “chain”, which means a chain of blocks. Moreover, it’s not just a randomly generated chain, it is a rigorous sequence. You may ask what are these blocks and what are these chains? Blocks contain transactions and contracts of data inside the system presented as cryptographic information. These blocks develop the chains, which means they are connected. If you need to create a new block, you have to read the data from the previous blocks.
The data is accumulated and forms a database. The best thing about this database is that one can’t delete or change anything inside this database or substitute any of the blocks.
How does the process work? Let us suppose that person A needs to send some money to B. All transactions jump into this network, and data is transferred into these blocks. Each of the blocks contains a number and the hash of the previous one. All the blocks are sent to all system members (also known as nodes) for verification. If there are no mistakes, all the nodes add this new block to their part of the system. Only after that, is this new block added to the “main” system. Finally, the money is transferred. That’s the way it works.
In simple words, blockchain is a mathematical model, which processes, secures, and finalizes transactions. So, what is blockchain in banking? It is a shared ledger that banks and their partners use to record and settle transactions.
Typically, banks have a lot of transactions every single day. That is one of the main reasons why this technology will likely work out for this industry.
To cut a long story short, there are two main reasons for that:
- It is much cheaper to use this technology.
- This technology is much faster.
It Is Much Cheaper to Use This Technology
Banks are always trying to find ways how to spend less money, so if a bank sees a way how to save money – it will seize the opportunity. One of the most critical issues for banks has always been the return on investment rate (or just ROI). Some experts claim that there are three major problems, which affect banks’ efficiency and profit.
They are:
- An uncertain regulatory environment (which keeps changing).
- Shifting interest rates.
- Digital disruption.
Precise figures are hard to find, but the pressure is easy to see in cross-border payments. The total amount of money (for payments) that businesses send abroad is from $150 to $300 trillion. The G20 set a goal of bringing the average cost of cross-border retail payments down to 1% by 2027. The Financial Stability Board (FSB), however, says in its latest progress reports that the target is unlikely to be met, and many transfers still take days.
Will blockchain help to ease these problems? There is a high likelihood that it will. Blockchain can remove all extra expenses for customer identification. This is where open banking comes in. Open banking already lets customers share their data with licensed third parties, and a shared ledger can record who gave consent and when, so each bank doesn’t have to repeat the same checks.
Here’s how a report by PWC puts it:
Blockchain systems could be far cheaper than existing platforms because they remove an entire layer of overhead dedicated to confirming authenticity. In a distributed ledger system, confirmation is effectively performed by everyone on the network, simultaneously. This so-called ‘consensus’ process reduces the need for existing intermediaries who touch the transaction and extract a toll in the process. In financial services, that includes those who move money, adjudicate contracts, tax transactions, store information and so on
Some industry estimates claim this technology can save banks up to $20B annually. It sounds awe-inspiring. However, financial institutions still doubt the usefulness and profitability of this new technology. And it’s easy to understand why because it is very hard to accept a new system when you have worked with the old one for decades.
In other words, it is vital for banks to find a way to learn to trust blockchain technology. It is the only way how to start to use it, thus, saving money. Of course, it will take some time. How much time will it take? Nobody really knows. As the old proverb says, “Only time will tell”. Experience has shown, however, that things go much faster when money is involved.
This Technology Is Much Faster
To better understand how this technology works, let’s imagine that you are shipping clothes from China to Germany. Among the significant questions are the costs of delivery and the speed at which they come to the delivery point. Technically, nowadays it can take no more than a day. Nevertheless, there is not only the delivery time to consider. Let’s not forget about the paperwork. It will take no less than a week to settle the issue. Blockchain can significantly ease this process, making such a thing happen within a couple of seconds, and it is an excellent example of why it is much easier and faster to use blockchain technology.
Let us not forget that SAP, ATB Financial, and Ripple jointly launched one of the first international blockchain transactions, from Alberta, Canada to ReiseBank in Germany.
The result was quite stunning – ordinarily, it takes from 2 to 6 business days for such a kind of transaction to be processed, whereas the blockchain transaction took around just 20 seconds. The technology has been improved many times since.
Today, the largest banks run this technology in production. According to J.P. Morgan, its Kinexys platform has processed more than $4 trillion in transactions since launch, with average daily volume above $7 billion. In October 2026, the bank also expanded its JPM Coin deposit token to Ethereum for institutional clients. In July 2026, Swift launched a blockchain-based shared ledger for a live pilot with 17 banks across six continents, including Citi, HSBC, UBS, Wells Fargo, BNP Paribas, and BNY. The ledger lets banks move tokenized deposits for customers around the clock, including nights and weekends, with final settlement still handled through existing payment systems.
To use these tokens, customers and corporate clients need a place to hold them. That is where a blockchain wallet comes in. If you wonder what is a blockchain wallet, it is software that stores the private keys of its owner and lets them send, receive, and sign transactions on the network. Banks are already building wallet services around tokenized deposits.
They all do this because they understand that blockchain it’s not just about savings. It also offers faster transactions, which means happier customers, efficiency, and accuracy.
Conclusion
We can clearly see that many banks have begun issuing tokenized deposits and digital tokens of their own and are ready to use blockchain technology for transactions nowadays, and this trend seems to be getting more and more popular. Banking on blockchain is no longer a question of whether, but of how fast.
It is hard to find other reasons for it, except the time and money-saving factor. Frankly, there is no need to look for any other reasons, because what can be more important for a business than time and money?
