Table of Contents
Blockchain is a decentralized, replicable, distributed ledger technology that underlies many incremental and disruptive innovations. Blockchain technology relies on algorithmic blocks containing transaction information, which are connected and validated in chronological order and form a chain that contains permanent, immutable, transparent, and tamper-proof records (Guerar et al., 2020). According to the extant literature, five defining elements characterise blockchain (Chang et al., 2020):
Characteristics of Blockchain
1. Computational Logic
Blockchain transactions can be automatically activated by algorithms. Smart contracts designed on a blockchain can be programmed to automatically perform transactions between nodes.
2. Decentralisation
Blockchain allows direct peer-to-peer transactions without the need for a central node.
3. Irreversibility of Records
The record of a transaction is immutable and is part of a chain that organizes all transactions in chronological order.
4. Distributed Database
The blockchain database cannot be controlled by a single individual but can be modified by adding new transactions and validated by participants.
5. Transparency with Pseudonym
Transactions on the blockchain are transparent and visible to any participant, but each node can decide whether to provide its identity details or use a pseudonym.
These characteristics ensure that blockchain-based technologies can decrease transaction costs dramatically, together with execution times. Moreover, distributed ledger technologies do not need intermediaries or trusted third parties to validate transactions. This decentralized, digital technology is applicable to virtually any industry and has the potential to be a disruptive innovation, leading to the advent of the Fourth Industrial Revolution, or Industry 4.0. Blockchain has been successfully applied to various industries, including engineering and energy management, figurative arts, social sciences, and business management.
Impact on Banking and Finance
Blockchain has had a significant impact on the banking and finance industry. It has the potential to reshape the way modern finance is organized, affecting intermediaries’ roles and organization, means of payment, payment transactions, asset management, clearing and settlement processes, real estate deals management, insurance contracts, public procurement, and more (Mills et al., 2017).
The readiness of banks to adopt blockchain technology is a topic of debate in the literature. Some scholars argue that the competitive nature of the banking industry has inclined many intermediaries to adopt these new technologies to internalize potential competition. However, other scholars identify technological, organizational, educational, and environmental barriers that may hinder blockchain diffusion in banking and finance.
A study assessing the perception and readiness of the Bangladeshi commercial banking sector towards the Fourth Industrial Revolution found that the sector is only in a “preliminary stage” of readiness and that significant changes to the banking business model are required to accommodate new technological innovations.
However, a behavioral survey on blockchain-based services users shows that the financial sector has higher knowledge and awareness, greater value-added for end-users, and greater institutional willingness to adopt these new blockchain applications compared to other sectors.
The COVID-19 pandemic has acted as a catalyst for the adoption of distributed ledger technologies in banking and finance. It has highlighted the infrastructural deficiencies of the traditional banking system and paved the way for digital financial solutions that do not involve direct interaction with customers.
Literature Review
The literature on blockchain in banking and finance has grown significantly in recent years. However, the existing contributions are extensive but fragmented. This paper aims to provide a bibliometric review and a content analysis of the antecedents, consequences, and applications of blockchain technology in banking and finance, as well as propose a future research agenda.
This review considers contributions at the individual level, firm level, and industry level to provide a wide perspective on the topic. While there have been generalist bibliometric reviews exploring the diffusion of blockchain technology in different industries, this review specifically focuses on the banking and financial industry.
Methodology
The methodology adopted in this paper combines qualitative and quantitative approaches. A bibliometric review accompanied by a content analysis is conducted to analyze the academic contributions regarding blockchain technology in banking and finance. This approach aims to provide a comprehensive overview of the literature and identify unanswered research questions.
Sample and Characteristics
The sample used in this study consists of academic articles related to blockchain technology in banking and finance. The characteristics of the sample include the research streams and topics covered in the literature.
Bibliometric Analyses
Several bibliometric analyses are conducted to analyze the sample of articles. These analyses provide insights into the trends, keywords, and citation patterns within the literature.
Research Streams
The research streams identified in the literature on blockchain in finance are discussed in this section. These streams include individual-level, firm-level, and industry-level perspectives on the topic.
Future Research Agenda
Based on the analysis of the literature, a future research agenda is proposed. This agenda highlights the unanswered research questions and areas that require further exploration.
Conclusion
In conclusion, blockchain technology has had a significant impact on the banking and finance industry. Its characteristics, such as decentralization, transparency, and immutability, have the potential to revolutionize various aspects of finance. The readiness of banks to adopt blockchain technology is a topic of debate, with some scholars arguing for its adoption and others identifying barriers to diffusion. The COVID-19 pandemic has accelerated the adoption of distributed ledger technologies in banking and finance. This paper provides a comprehensive bibliometric review and content analysis of the literature on blockchain in finance, highlighting research streams and proposing a future research agenda.
