Blockchain technology has received much attention from academicians and industry practitioners because they perceive that it can contribute to the bottom line of corporations. Current literature shows a significant need for adopting blockchain technology in the finance and banking sector to bring digital disruption. The main objective of this chapter will be to identify the principles of blockchain technology and how it impacts the performance of the financial and banking sector. The secondary aims of this chapter will be to examine the challenges faced by the banking and insurance sector and analyse the characteristics of blockchain technology to suggest a model that collaborates with the other ecosystems to overcome those challenges. The chapter identifies models that have been suggested by other researchers and finally proposes a framework for the adoption of blockchain technology in the finance and banking sector.
TopIntroduction
Blockchain is still in its infancy but lately has gained much attention from scholars and industry practitioners. The finance and banking sector has not been excluded from this exodus as it has emerged that Financial Technology (FinTech) and Blockchain have been topical issues in the sector (Chang, Bandier, Zhang, Xu, Zhang and Arami, 2020). Big data, machine learning, Artificial Intelligence, and the commercialization of technology were the first significant and remarkable trend in the evolution of FinTech, in addition to the risk-taking by some non-financial firms which invested in the financial business (Chang et al., 2017). Zetzsche et al. (2017) posit that a chemical reaction is presumed to occur when technology and finance are combined, which inherently creates a multiplier effect. Pilkington (2016) reiterates that the characteristics of blockchain technology, such as allowing trust to grow faster among the platform user, swift data transfer with reduced cost, etc. fascinate the end-users, and hence there is a need to adopt the technology.
Antonio and DiNizo (2018) state that Blockchain technology is growing very fast in the financial sector, thus revolutionizing how people handle their businesses. Nevertheless, the development of Blockchain technology has not yet fully grown as it is still facing some challenges in areas such as scalability, privacy, latency, and security (Chang et al., 2017). This chapter explores the current trends in the financial and banking sector in adopting blockchain and the barriers to its adoption, and possible ways to overcome those barriers. In addition, this chapter will demonstrate how Blockchain technology can leverage the sector by implementing principles of Blockchain technology. Varma (2019) defines blockchain as the decentralized reproduced ledger technology that motivates Bitcoin and other cryptocurrencies that offers possibly appealing complementary ways of managing modern finance. The blockchain is a decentralized, replicated, tamper-resistant append-only ledger of transactions. Challenges that are associated with Blockchain technology include scalability (Zheng et al., 2018; Marr, 2018, Biais et al., 2019), security (Werbach, 2018; Price, 2018), privacy leakage (Meiklejohn et al., 2013; Kosba et al., 2016; Cong & He, 2019) and energy consumption (Price, 2018).