Blockchain consortium networks: Adding security and trust in financial services

• Published date: 01 April 2020
• Author: Bob Jacobs,Julia Nathan
• Date: 01 April 2020
• DOI: http://doi.org/10.1002/jcaf.22428

BLIND PEER REVIEW

Blockchain consortium networks: Adding security

and trust in financial services

Julia Nathan

1

| Bob Jacobs

2

1

Cloud Solution Architect, Microsoft,

Annandale, Virginia

2

Cloud Solution Architect, Microsoft,

Chester Springs, Pennsylvania

Correspondence

Email: julia.nathan@microsoft.com

Abstract

This article explores blockchain consortium networks as an emerging technology

for financial institutions. Blockchain is quickly becoming recognized for its value

as an immutable ledger within the financial services industry. While Blockchain

provides direct benefits in fraud prevention and transaction efficiency, consortium

networks specifically address a need for increased trust and security in shared

business processes. Also discussed are strategic decisions needed for implementing

blockchain consortium networks at the enterprise level with topics ranging from

membership choices to use of cloud services.

KEYWORDS

blockchain, cloud services, consortium network, know your customer, standby letter of credit

1|INTRODUCTION

Blockchain's potential as an industry disrupter for financial

services grows daily with increased adoption and initia-

tives such as the European Union Payment Services Direc-

tive, which aims to increase non-bank participation in

financial transactions (EVRY, 2019). Correspondingly,

banks such as ABN Amro and Capital One offer public

Application Programming Interfaces (APIs) that facilitate

third-party development of financial software by providing

mechanisms to access customer account details and con-

duct financial transactions. With the introduction of new

development comes the potential for new technologies;

Blockchain's ability to function as an immutable ledger

while offering mechanisms for security and trust make it a

prime technology for use in financial services. While it is

tempting for businesses to wait and see how blockchain

technology matures before incorporating it into their oper-

ational practice, delay in adoption introduces the risk of

not influencing the future direction of pertinent legislation

and industry initi atives.

The Financial Services industry offers several oppor-

tunities for blockchain consortium networks to provide

increased confidentiality and trust in key business

processes. Business processes that benefit from blockchain

demonstrate the following characteristics:

1. Business process requires reconciliation or is subject

to fraud

2. Business process crosses trust boundaries that is, pro-

cesses that involve parties from other companies or

organizations

3. Business process suffers delays or takes significant

time to complete due to transactions with third parties

4. Business process involves repeated, manual actions

that could be automated

For example, in financial trade or asset management

processes, each party maintains its own record of the

transaction, either as paper copy, digital record, or both,

which introduces the potential for discrepancies. Signifi-

cant time can be spent investigating potential fraud or

resolving conflicting information across parties. This

problem is magnified in global financial transactions

where third parties are needed to navigate international

boundaries or validate transactions, which also intro-

duces costly service fees. In other scenarios, companies

that require multiple departments to handle customer

Received: 5 November 2019 Accepted: 7 November 2019

DOI: 10.1002/jcaf.22428

J Corp Acct Fin. 2020;31:29–33. wileyonlinelibrary.com/journal/jcaf © 2020 Wiley Periodicals, Inc. 29