Home office and travel restrictions are forcing banks to rethink their ways of doing business. Those who have started to digitize now have an advantage. How the crisis will push blockchain banking and digitalization.

There is one positive aspect to the Corona-crisis: Companies of all sizes and in all industries now have to deploy digital technologies. The crisis will show not only the efficiency of digital platforms but also the inefficiency of existing legacy systems. The result could be a change in attitude that could have a major impact on the financial industry. 

Banks, in particular, have so far been rather “lazy” when it comes to digitizing their operations. Although bank managers like to talk about “digital banking,” looking at the actual products and services offered by most banks, the digital age is still a long way off.

Fintechs have so far dominated blockchain banking

The same goes for Blockchain. Although many banks have already launched blockchain initiatives and are increasingly experimenting with the technology, a digital banking revolution has not yet taken place. Instead, the future of the financial industry tends to be invented elsewhere: More and more technology companies are pushing into the financial sector. 

Many of these “fintechs” are much better positioned to come up with solutions than the technology departments of large banks. They are more agile, faster, and more innovative. Banks, on the other hand, are often held back by bureaucratic hurdles and overburdening regulations. That’s why, looking at the history of banking innovation, many new financial industry technologies were not actually invented by banks, but by external technology companies – for example check imaging. 

But fintechs will not revolutionize the banking industry on their own. Without the cooperation of traditional financial institutions, there will be no large-scale blockchain banking infrastructure. Established banks and stock exchanges will continue to rule the industry, as they enjoy the trust of their customers. Names such as Deutsche Bank, Commerzbank, or Deutsche Börse are well known – but who outside the crypto industry has ever heard of Binance?

Blockchain banking is a cross-industry effort

To develop digital banking infrastructure, traditional financial industry players need to team up with the new Fintechs. Also, the various players in the financial industry must work together because Blockchain is all about interconnectivity. No single company will be able to achieve any breakthrough alone.

A good example is the blockchain platform FundsDLT, announced only last week. The project is a cooperation of leading companies from various sectors of the financial industry. Among them are Clearstream, Credit Suisse Asset Management, the Luxembourg Stock Exchange, and Natixis Investment Managers. The project aims to create a blockchain-based technology platform for digital banking processes. 

The financial industry will need many such collaborations to develop large-scale digital infrastructure. Banks will not have to develop the technologies by themselves, but they will have to show an understanding of the value of digital technologies. This mindset has slowly been growing in recent years. The crisis will likely accelerate progress.