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Banking as a Service: Predictions for 2023

Disruption in Banking with Blockchain and IoT

Banking with Blockchain and IoT

People talk about blockchain and decentralization frequently these days. But do we understand what it means and how it can help us? In this blog, we shall discuss the future of banking – disruption in banking with blockchain and IoT.

What is Blockchain and DeFi?

A blockchain is a shared, immutable ledger that facilitates the process of recording transactions and tracking assets in a business network. It is based on the peer-to-peer concept which removes intermediaries from the system called Decentralized Finance (DeFi).

Our traditional financial system runs on centralized infrastructure that is managed by central authorities, institutions, and intermediaries, whereas decentralized finance is powered by code that is running on the decentralized infrastructure of the Ethereum blockchain. Ethereum is a decentralized, open source blockchain with smart contract functionality.

By deploying immutable smart contracts on Ethereum, DeFi developers can launch financial protocols and platforms that run exactly as programmed and that are available to anyone with an Internet connection.

Too difficult to absorb?

Ok. Let’s make it simpler with an example –

In a normal international buying selling transaction, there are multiple parties or stakeholders:

  • Seller (exporter) – X
  • Buyer (Importer) – Y
  • Seller’s Bank
  • Buyer’s Bank
  • Central Bank of exporter’s country (Reserve bank or by whatever name that country calls it)
  • Central Bank of exporter’s country (Reserve bank or by whatever name that country calls it)
  • SWIFT (Society for Worldwide Inter-bank Financial Telecommunication), which records transactions

Assuming the invoice has been raised by X on Y for US$50,000/-. Accordingly, the copy of invoice should be available with different parties.

Can you imagine recording this transaction of US$50,000/- in the books of 7 different stakeholders from different countries at the same time by any online ledger? Absolutely not. Even if we use an e-commerce management software, this may not be easily possible.

Benefits of Blockchain in Banking

Blockchain makes all the above possible and there are many upsides to it –

  • Very safe
  • Transparent
  • Trustworthy
  • Simplifies record keeping
  • Reduces maintenance costs of data since it’s distributed
  • Removes many intermediaries in the entire operation as parties directly communicate with each other.

Blockchain technology provides a platform for untrusted parties to come into an agreement without the help of a middleman. This is possible as Blockchain provides a ledger that nobody administers in which data of all party transactions are recorded.

Blockchain has received a lot of attention in the last decade and many leading institutions and banks have started experimenting blockchain in their operation. For example, Australia’s stock exchange will replace its registry, settlement, and clearing system with blockchain technology to cut costs for customers.

IoT in Banking

Internet of Things (IoT) is taking the world by storm. Therefore, self-driven cars, smart homes, drone based farming, and automated career services are changing the way this planet is reshaping its journey. At present, banking is behind the curve in the usage of IoT. However, soon enough we will see IoT being used in a major capacity in the banking sector.

For example, when we take into consideration, the usage of Smart Beacons. These are small proximity sensors that send signals using Bluetooth technology. When a registered smartphone or a device is in the range of the beacon, it triggers a notification on the device. These beacons are set up in banks to identify when a customer is near its branch. When a customer is nearby, the bank’s beacon identifies the customer and can send them a contextual message such as ‘May I help you?’ or these beacons can inform various service counters of the branch. In case the customer is in shopping malls, beacons can communicate the cashbacks and discounts on usage of the banks’ credit card.

Outside the banking world, IoT has advanced in many industries. However, the usage of IoT in banking is very confined to the use of smart beacons. Some of the early adopters of smart beacons are Citi Bank, Barclays, Westpac, and Chase.

Why Use IoT in Banking?

IoT is becoming well known in the financial sector and has a lot of potential to grow. Some of the advantages using IoT would be –

  • Better security – It will help detect and prevent frauds before it even happens. Security being a major concern, financial institutions can utilize IoT to identify the crime location, the device used to commit the crime, etc.
  • Enhanced data capture – Through a network of micro sensors and mobile apps, IoT helps banks and other financial institutions to capture data better. This will significantly reduce the waiting time and enhance the services provided by financial institutions
  • Smoother Transactions– Imagine making your transactions through voice or facial recognition instead of using cash or credit cards. With the help of IoT, organizations can achieve such personalized biometric accesses to their accounts.
  • Build strong customer relations– With better data analysis, IoT can help banks and financial institutions better cater to the needs of the customer, thereby building strong customer relations.


IoT is becoming well known in the financial sector and has a lot of potential to grow. Some of the advantages using IoT would be –

The use of such technologies helps banks to better transition from traditional to modernized processes to provide better customer experiences. Soon, banks would want to increase the use of technologies like Blockchain and IoT to capture data better, gather insights from the data, and turn these insights to take better decisions- right from increasing the top line to providing better customer services.

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