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article imageQ&A: Blockchain to cause further disruption of financial services Special

By Tim Sandle     Oct 14, 2018 in Business
Blockchain is starting to have a huge impact on finance, with the potential of offering a more efficient, more transparent, more secure financial marketplace. The path towards this will be rocky. A leading expert — Victor Santos — provides analysis.
Blockchain is a distributed ledger and immutable database for transferring data very securely. The technology provides the opportunity for significant disruption and innovation, especially in the finance space. Victor Santos is the Co-Founder & CEO at AirFox, and he is using technology to build and support innovative financial solutions for the billions of underserved individuals around the world. Digital Journal spoke with the entrepreneur about his views on blockchain, technology and the disruption of finance.
Digital Journal: How Is technology disrupting finance in general?
Victor Santos: Today, almost every type of financial activity—from banking to wealth management to payments—is being upended by new technology. For example, machine learning is now commonly used to identify fraudulent transactions via tools that quickly sift through large data sets determining patterns, detecting anomalies, and predicting the possibility of fraud or cyber attacks before they transpire.
There are also expanding security techniques involving biometrics. As cybercrime becomes more sophisticated, unique identifiers like vocal pattern analysis, retina and thumbprint scanning, along with facial recognition technologies are being implemented to safeguard authorized access and account defense.
Even customer service, often an overlooked function within financial services firm, is changing. Nearly every major online banking platform hosts a chatbot to interact with customers and learn from questions. No longer do organizations need to hire and train large service staffs to vet problems and assist people because AI can now do all the heavy lifting.
Blockchain although early, will be, in my opinion one of the biggest disruptor in the entire financial services industry value chain. Blockchain will enable the democratization and decentralization of money via the internet in a secure borderless way.
DJ: With blockchain, what are the benefits for the financial sector?
Santos: Blockchain-based transactions will ultimately create a more efficient, transparent, and secure financial marketplace. Decentralized and cryptographically secured technologies promise to democratize the financial system and transform how payments are processed and value is exchanged digitally.
DJ: Are there other examples?
Santos: Yes, it also offers other examples. Organizational: Decentralized models of operations and governance offer a potential competitive advantage. Operational: Common process and data models can reduce reconciliation effort and risk and increase synergies across acquired firms. Technological: Blockchain technology enables new forms of collaboration across previously competitive entities, enabling new revenue streams and cost advantages for early adopters. Distributed ledgers dramatically reshape the financial markets with significant impact on business models, reductions in risk and savings of cost and capital.
DJ: How about trust?
Santos:Blockchain also reduces settlement times, creates trust in environments where entities don’t trust each other, and facilitates the transfer of money between trustless entities. A consolidated and immutable audit trail and ledger consolidation improves operations and efficiencies in both incumbent financial players and new ones. Other benefits include capital raising, decentralized trading of asset-backed “tokens” that represent real-world assets and a more open financial ecosystem.
DJ: How widely is blockchain being adopted?
Santos:There are many who believe that blockchain has the potential to impact society in ways similar to the transformation brought about by the internet. I am one of those people.
In finance, health care, government, supply chain, manufacturing, logistics, and many other industries, this technology is positioned to change the way our world operates. Blockchain has also received the nod from the enterprise, with companies like IBM throwing large amounts of money towards further development.
DJ: Where will blockchain ultimately end up?
Santos:The full potential of blockchain is still being realized, but with the rise of connectivity, explosion in mobile, and widespread digitalization of industry, decentralization is a paradigm whose time has come. Many implementations are still in proof-of-concept stage, but nearly every serious financial organization is experimenting in some way with blockchain. Those who do not at least understand it may be eclipsed by agile upstarts.
Adoption of blockchain however is unlikely to happen in one to two year time-frame. There are still complex issues to be solved before mainstream adoption such as liquidity exchanges that are regulated, clear regulatory guidelines, lower transaction fees, larger amounts of processing of transactions per second, and institutional buy in.
In a follow-up interview Victor Santos discusses AirFox's own technology, which is designed to offer financial access to the world's unbanked,beginning in Brazil. See: "Q&A: Blockchain provides financial access to the unbanked."
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