Independent Banker - November 2019 - 25

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industry participants remain uncertain of the true impact
blockchain will have on their businesses.
However, nearly 18% of chief information officers in
banking and investment services who responded to Gartner's
annual survey say they have adopted or will adopt
some form of blockchain technology within the next 12
months, and another 15% say they will adopt it within the
next two years.
" Community banks are still in the process of educating
themselves on blockchain, " says Kathy Strasser, executive
vice president and chief operating officer of $1.4 billion-asset
IncredibleBank in Wausau, Wis. " Like many new technologies,
there is confusion of what it is or where to apply it. In
the case of blockchain, it requires some sort of application
for it to be beneficial, and therefore, like any other project,
requires attacking a meaningful business problem [and]
finding those processes within our banks that are not working
today. "
Slowly but surely
" Blockchain is somewhere between the 'trough of disillusionment'
with bitcoin and climbing the 'hype curve' with
enabling payments for interbank transactions and other
applications, " Davey says. He's referring to the analyst terminology
for the period when experimentation with a new
technology declines-the trough-before it eventually finds
its audience.
In other words, despite the technology's novelty, banks
are finally looking to blockchain as more than a bitcoin
underpinning. Instead, they're starting to view it as a means
to improve data integrity, quicken transactions, lower risk
and reduce labor.
Carlos Arena, the head of Americas business development
at R3, an enterprise blockchain software firm, sees two different
approaches to this technology. " There are two ways of
characterizing banks' approaches here: those who are leaders
and those who are fast followers, " he says.
Strasser says larger banks are doing more with blockchain
at this time, both internally and through partnerships with
other banks and even competitors. " My understanding of
the benefit of blockchain may be to look for business problems
where there are many different organizations looking
to accomplish something together: the power of multiples, "
she adds.
Community banks making a foray into blockchain
That said, some community banks are now becoming links
in the blockchain and are considering using the technology
to keep their data secure.
" Top-of-mind issues for our bank are fraud and
cybersecurity, " Strasser says. " I think those are two key
areas where blockchain could play a role for community
banks going forward. In both of these instances, blockchain
could be used to determine the integrity of data. "
For example, she says, blockchain wouldn't prevent criminal
access. However, it could highlight anomalies in the
data, raising awareness that there is a problem somewhere
within the network.
More recently, $91 million-asset Kirkwood Bank of
Nevada in Las Vegas was purchased in July 2019 by Jeffrey
" Top-of-mind issues for
our bank are fraud and
cybersecurity. I think those
are two key areas where
blockchain could play a role
for community banks ... "
-Kathy Strasser, IncredibleBank
Berns, CEO and founder of Blockchains, LLC, an investment
firm dedicated to blockchain. Berns owns the community
bank through a separate holding company, JBNV Holding
Corp., and not under his blockchain-dedicated venture.
At the time of the acquisition, Berns told the Nevada
Independent that while he primarily bought Kirkwood Bank
to ensure his company's access to the financial system, he
also sees another purpose.
" [It's] to create an environment where the blockchain ecosystem,
the legitimate businesses out there who are trying
to build projects that are going to empower the individual
and better the world, that they have a bank that understands
what they're doing and isn't fearful, " he said.
The question for community bankers, says Arena, is when
is the right time for their bank to begin looking at blockchain
and, if a use case is right for them, when they should
adopt it.
He adds that there's a risk in losing out on opportunities
that leader banks are pursuing: " Early blockchain applications
are focused on cost efficiency, but we believe they will
soon expand to providing new services and products. "
Karen Epper Hoffman is a writer in Washington state.
independentbanker.org Q 25
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Independent Banker - November 2019

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