Finance Should Be a Network, Not an Institution

The modern banking system presents itself as a marvel of accessibility, which only needs a swipe of a phone or a tap on a screen, and money moves, and bills are paid. 

However, while the experience feels seamless, it isn’t. Beneath the polished interface lies a system held together with the financial equivalent of duct tape. 

The global banking system lacks coherence, given that it is essentially a patchwork of independent institutions, each running its own ledgers, its own infrastructure, and its own rulebook. When money moves between them, it doesn’t travel so much as it negotiates, passing through clearinghouses, correspondent banks, and settlement systems before arriving, days later, at its destination. 

Every step in that journey exists not to serve the customer but to reconcile the incompatibilities of systems that were never designed to talk to each other.

Banking Remained Behind While the Internet Advanced

Other global systems have solved this problem, with the internet being one of the most instructive examples.

In the early 2000s, the internet faced a version of the same challenge the financial system does now: how to get independent, competing networks to communicate without forcing them into a single centralized structure? 

The answer was open protocols like TCP/IP and HTTP, which are technical standards that anyone can use, improve upon, and come up with new ideas. They didn’t need gatekeepers or bilateral agreements; all they needed was a common framework that turned a bunch of separate networks into the connective tissue of the modern economy.

On the contrary, finance developed, but in a totally different way. Instead of encouraging openness, the system created walls, and instead of encouraging collaboration, institutions developed into closed frameworks that connect only through bilateral agreements.

A simple transaction could trigger a series of reconciliations between databases to balance numbers out and ensure the involved banks have accurate records. The processes are even longer when dealing with cross-border transfers. 

According to the Bank of International Settlements, completing a single international transfer involves a series of banking networks and financial institutions processing the transaction. These lengthy processes serve no customer, only existing to patch over the seams between disconnected systems while adding costs, delays, and failure points along the way.

An individual completing international payments across borders will need to wait for days, perhaps even a week, in some cases, to receive confirmation. And the fees will be humongous. Stripe says that most cross-border payments take one to five business days to arrive, but the exact time depends on the route and currencies used. Also, when all costs are taken into account, transaction costs can be anywhere from 3% to 7% of the payment value. 

However, institutional banking is shifting. A 2025 transaction banking survey released by consulting firm CGI indicates that corporates and individuals are increasingly spreading their financial activities and assets across multiple banking networks. This is a signal of increasing demand for multi-bank systems that enable clients to enjoy services from multiple institutions simultaneously.

Consumers already combine platforms for communication and work; hence, they expect financial systems to offer similar, if not higher, levels of flexibility. 

Blockchain Offers a Different Architecture

Blockchains, through their core principles of distribution, transparency, and immutability, can replace dozens of disconnected bank databases with a single synchronized ledger that every participant can verify in real time.

For example, Ethereum, the second-largest blockchain ecosystem, has been designed with auditability at its core. ETHScan allows anyone to publicly verify the existence of a particular record of asset transfers on the blockchain.

Of course, critics may worry that shared infrastructure means shared mediocrity since banks building on the same technologies will stop competing on aspects that matter. However, it’s quite the opposite. For instance, Ethereum remains a good example of a highly competitive network hosting a myriad of competing decentralized finance lending, staking, and swapping service providers. Layer 2 solutions like Polygon, Optimism, Arbitrum, and ZkSync actively compete to provide services to the crypto community. 

Rather than every bank maintaining an independent database, they could all benefit from an Ethereum-like distributed ledger technology that autonomously reconciles after every transaction, effectively reducing intermediaries, costs, and delays.

There’s proof this approach can succeed. For example, the Bank of International Settlements, together with banks in China, Thailand, and the UAE, completed 164 payments and foreign exchange transactions valued at $22 million using a collaborative project called mBridge.

These experiments prove that blockchain has the revolutionary effect of redefining finance, and especially banking, creating a financial environment that is indeed interoperable. The technology can move banking from independent silos to open protocol networks that allow all stakeholders to participate. 

Additionally, blockchain network-based financial systems have perks that extend beyond just the normal speed of traditional payments, such as reducing operational complexity, allowing more seamless interoperability, and supporting broader participation.

Banking Must Adapt to Network Infrastructure

The demand for a structural change within the banking system is not a far-fetched subject. Initiatives like mBridge show that central banks recognize the limits of current systems. They remain slow, rely heavily on reconciliation, and create inefficiencies and delays that affect customer satisfaction and trust. 

Other regulators, like the BOJ and the New York Fed, among others, have in the past joined DLT tests to address some of banking’s challenges. Dubbed Project Cedar, the results from the test showed that the blockchain-enabled payments system settled transactions in fewer than ten seconds on average and that throughput across the system increased as additional currencies were included.

Key opinion leaders in banking concur with the need for structural changes to address the issues. Banking networks have sped up payments and upgraded messaging systems and phone apps, but the systems remain widely segregated, retaining the inefficiencies that hinder seamless transactions and customer experience.

Blockchain takes a fundamentally different approach, providing banks with a network-based architecture and inviting interoperability, just like the internet’s protocol model. Lending service delivery, asset management, and risk management, all coupled with competition, will thrive in an interoperable model.