The Point

Blockchain: Your Link to Speed, Security and Growth

May  02 
Marc West and Matt Wilcox  Chief Technology Officer and Vice President, Marketing, Digital Banking Group, Fiserv 

Blockchain isn't a secret. You've read about it, heard about it and, perhaps, found yourself in discussions about it. It is, after all, among the fastest-evolving areas of technology. Yet blockchain still is often misunderstood, leaving financial professionals wrestling with one major question: Why should I care?

It's a fair question that stems from understandable skepticism. You might suspect it's simply the latest tech fad. Or maybe you think it applies only to the megabanks; not your department or financial institution.

The answer goes straight to a financial institution's bottom line: Blockchain matters because it holds the potential to fuel the growth of your business by improving the transparency, auditability, security and speed of financial transactions and applications.

Those characteristics are fundamental reasons why Fiserv cares about blockchain. Along with leading institutions and industry participants, we are actively engaging to define practical applications of the technology that drive value for our clients and their customers.
How does it work and what can it do? The best way to reach those answers is to understand the three foundational elements of blockchain.

It's a Basic Protocol; Not a Complicated New Product

Blockchain is an evolution of current technologies; not a revolution. It can be a purpose-built distributed ledger that allows for virtually anything of value to be transparently traded, tracked and verified. For all involved parties, blockchain employs an integrated smart contract, rather than one applied from outside the system, that establishes the rules of business and speeds up the process.

Practically, blockchain is a network that lets participants transfer ownership of digital assets and then records those transactions on the ledger in real, or near real, time. All of the participants have access to the ledger, making it a single source of truth for all transactions.

There are many types of blockchains. Most either are permissioned (private) or permission-less (public). As the names imply, a permissioned design requires pre-established and approval-based access to create, manage, transfer or seal any digital assets. Permission-less blockchains allow for self-registry and identity-less access. For financial services, the most secure and practical type is a private blockchain. Only known participants and digital assets are permitted to use that type of network design.

The distributed ledger design enables multiple points of real-time verification and validation, meaning all transactions are 100 percent auditable. Instant transaction delivery increases end-to-end functional confidence and leads to faster, more accurate reconciliation than with traditional books and records.

And blockchain enhances security by ensuring all parties are known, all transactions are cryptographically verifiable and no private data ever leaves the institution.

Blockchain Can Help You Grow

The characteristics of blockchain may open the doors to multiple applications. That, in turn, can position financial institutions to achieve their one shared goal: growth.

The technology can help financial institutions enter markets where they don't have a footprint. It's a low-cost, high-value protocol that goes beyond the traditional database by recording transactions in real-time and enabling the parties involved to control asset movement by interacting directly with the ledger.

To accelerate growth, blockchain may enable financial institutions to make partnerships happen faster in a safer environment.

It Offers Practical Applications

Pick a service that involves moving assets, and it's likely blockchain has the potential to play a role. It could transform person-to-person payments, data sharing, person-to-business money transfers, securities exchanges or even movement of frequent-flyer miles, to name a few.

For instance, Fiserv research has shown people value real-time speed, both in accessing their money and in making their payments. Blockchain offers one path for financial institutions to meet those expectations.

The benefits can go beyond that. The security features work toward enhancing confidence in the network and driving cost benefits in areas such as exchanges. The real-time functionality may lead to shorter, and less costly, settlement cycles on trade day.

No matter how it's used or what applications still are on the horizon, blockchain has transformative potential for those who dig in and understand it. Top organizations are testing its use cases. Now is the time to take a long-term, purposeful approach to finding the most valuable areas and smart ways to leverage the value that blockchains create.