By Bob Hackney
During meetings with credit unions leaders I frequently hear questions about blockchain, what credit unions need to know, and what they should be doing at this point in the development and application of the technology.
While it is easy to get caught up in the blockchain buzz, it is also important to understand the applications that may be available with this technology. After all, blockchain is a means to an end. In most cases, blockchain concepts require scale and acceptance for their business models to work. There are many innovators doing the heavy lifting in the financial industry trying to solve problems that credit unions face.
In a recent article by CUNA, it was stated that if someone is going to capitalize on blockchain’s financial services potential (the big banks), then credit unions cannot afford to be excluded from the conversation. CUNA also says credit unions who ignore the blockchain do so at their own peril, and they suggest that you follow where the “smart money” is going. With credit unions working together, blockchain may support solutions to credit union problems in the not so distant future.
To that end, several CUs, CUSOs, state leagues, and CUNA recently announced the CU Ledger Initiative, a project that will include participation by 125 credit unions. The goal of the initiative is to research blockchain technologies that have the potential to benefit credit unions by improving the speed, efficiency and security of financial transactions.
Great Tool Without A Problem?
However, there are experts in the financial industry who still believe blockchain feels like a great tool without a problem to solve. Despite the assessment, we continue to see an evolution in the blockchain network to make it more adaptable to real world problems, not only in financial services, but across governments and other industry segments as well.
The benefits of blockchain coalesce around a few central themes like its unique ability for all participants to share data while maintaining data validity. Blockchain’s open access provides the ability to transact and share data with any party regardless of where they are and how they typically transact. Then, there is the trust inherent within the blockchain network because all participants have a copy of all transactions on the network, making it nearly impossible for one party to hijack the network for individual gain.
Exactly what credit union problems blockchain applications solve remain to be seen. As with any new innovation the headlines will shout one day about how blockchain is revolutionizing the transactional world and the next day you will read how it is failing and will never work. The truth, most likely, will fall somewhere in between. Stay tuned.
Bob Hackney is president/CEO of CSCU, St. Petersburg, Fla.