Stock Analysis & Ideas

These U.S. Banks Are Rewriting Banking Dynamics with Blockchain Technology

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Blockchain technology has the potential to streamline lengthy banking processes. Let’s learn more about this technology and its early adopters in the banking industry.

Goldman Sachs (NYSE:GS) and JPMorgan Chase & Co. (NYSE:JPM) could be in the process of rewriting the dynamics of the banking industry with the adoption of blockchain technology. These are two of the first few banking companies that have integrated blockchain into their trading and business operations.

The traditional banking industry has this gigantic task of maintaining the records and processing the transactions of their ever-increasing customer base. They have to follow several procedures to ensure the safety and security of their customers. This makes the entire banking procedure quite costly and lengthy.

The use of blockchain technology in banking helps in alleviating these issues and streamlining the operations of banks. It reduces costs, improves transparency and fraud detection, increases automation, reduces the amount of paperwork, hastens verification process, and ensures decentralization of lengthy banking procedures, among other things.

Now, let’s learn more about how the aforementioned banking giants are utilizing blockchain technology to make the banking experience seamless for their customers:

JPMorgan Chase (JPM)

With a market cap of around $375 billion, JPMorgan Chase is one of the first banks to offer a blockchain-based platform, called Onyx, to its customers to carry out wholesale payment transactions. The platform helps facilitate payments, digital assets, and information sharing within the banking sector.

Onyx’s services include Liink, an information exchange network, Coin Systems for digital clearing and transfer of money, and Onyx Digital Assets for smooth exchange of different types of digital assets. JPM also has a center of excellence, which is focused on the development and launch of new blockchain networks, applications, and shared platform technology.

These offerings make the New York-based financial services provider a pioneer in the transformation of the banking industry.

Is JPM a Buy or Sell?

On TipRanks, the stock has a Moderate Buy consensus rating, which is based on 10 Buys, seven Holds and one Sell. JPM’s average price target of $138.33 implies upside potential of 19.8%.

JPM stock scores a nine out of 10 on TipRanks, suggesting that it has strong potential to outperform the market. Further, bloggers and hedge funds are positively inclined toward the stock.

Goldman Sachs (GS)

Goldman Sachs is catching up with JPMorgan in the use of blockchain technology within the banking segment. In June last year, it worked with the European Investment Bank for the first public digital issuance on Ethereum public blockchain. The two-year, €100 million bond was the first of its kind and unlocked a new era of transparency and speed for capital market transactions.

Additionally, the investment banking firm recently collaborated with Swiss financial technology company HQLAx for the execution of the first agency securities lending transaction on the blockchain. According to a press release by HQLAx, the transaction involved hundreds of millions of dollars and included a combined series of 35-day term transactions.

These initiatives show the $117.6 billion company’s commitment toward enhancing the banking experience of customers.

Is Goldman Sachs a Buy or Sell?

On TipRanks, Goldman Sachs has a Strong Buy consensus rating, which is based on 14 Buys and three Holds. GS’ average stock forecast of $394.27 implies 15.9% upside potential. Additionally, TipRanks data shows that financial bloggers are 95% Bullish on the stock, compared to the sector average of 68%.

Can Blockchain Technology Disrupt the Banking Industry?

Blockchain technology has the potential to disrupt the banking industry with its shared ledger feature. This feature can get rid of financial intermediaries and establish trust and transparency between the unknown transacting parties. The shared ledger technology makes use of cryptography to allow all transacting parties to control the data.

Blockchain technology is still new in the market, with not a lot of takers. It needs to gain mass acceptance to demonstrate its true potential. The technology also needs to overcome regulatory hurdles across the world to boost its uptake by financial institutions.

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