The Evolution of Traditional Banks

HSBC's plans to reduce their workforce by 35,000 people over the next 2 years due to a fall in profits caused its share price to drop by approximately 6% - £5.92 to £5.53 per share. While their decision to streamline their operations may have come as a surprise considering they are projected to make a pre-tax profit of over £10 billion (a 33% drop when compared to its previous year), their intention to invest further in technology in order to simplify and improve the efficiency of their operations did not.

The number of challenger banks and payment solutions disrupting this industry continues to grow, enabling consumers to access and manage their finances on-the-go through user friendly mobile applications. Revolut, Monzo, Clear Bank, Starling Bank, N26, Transferwise, Curve, Tandem, JaJa, Mono Bank, Koto and Tap are just a few examples.

Many traditional banks are trying to evolve to keep pace with this fast moving industry and having been exploring the advantages of using blockchain technology: 

1. Societe Generale issued (to itself) $112 million worth of bonds in the form of a security token on the public ethereum blockchain in order to explore whether using this technology allows for a more efficient process for bond issuances.
2. Banco Santander successfully trialled the issuance and redemption of a $20 million bond using the Ethereum blockchain as they wish to make issuing bonds faster, more efficient and simpler.
3. HSBC intends to move $20 billion worth of assets to Digital Vault, a new blockchain-based custody platform, as it aims to digitize paper-based records of private placements in order to increase standardization and speed up processes in the growing industry.
4. Sveriges Riksbank, Sweden's central bank, is testing an e-krona which (if the trial is successful and it is formally launched) would drive conventional payments and banking activities throughout the country. Instead of swiping a credit card or spending fiat currency, everyday transacting can move to the blockchain.

While it may take time to see blockchain solutions affect everyday life, it is clear that traditional banks have acknowledged that it is necessary to evolve not only to become more accessible for their customers but also because of the benefits that integrating new technologies into their businesses brings. 

It will be interesting to see whether traditional banks can evolve fast enough to keep pace with the challengers and disruptors in the industry.