How Banks Use Blockchain in 2025: Complete Implementation Guide

TL;DR

• Blockchain in BFSI has come a long way since pilot projects. These days, production systems handle billions of dollars every day. The industry has spent $6.8 billion in 2024 and is expected to reach $22.5 billion by 2026.
• Some of the best banking apps are for cross-border payments (40–60% cost savings, 95% faster), trade finance (10 days to 24 hours), securities settlement (T+2 to almost instant), and shared KYC (6 weeks to 24 hours, 70% cost savings).
• Insurance applications deliver automated claims processing (75% cost reduction), fraud detection, preventing 15-25% of $80 billion annual losses, and streamlined reinsurance, reducing processing from months to days
• Smart contracts for financial services and DeFi development open up new ways to make money, such as asset tokenisation (which is used by institutions for $300 billion or more), regulated DeFi products (which have yields of 4–8%), and supply chain finance platforms.
• It takes 18 to 30 months to put into place, and in mature use cases, it cuts costs by 30 to 70%. The biggest problems are that rules are not clear, systems don't work together, and there aren't enough skilled workers. The best chances are competitive moats and being the first to move.

Introduction

Banks spent $6.8 billion on blockchain in 2024. By 2026, that number will have grown to $22.5 billion.

This isn't hype anymore. JPMorgan processes over $1 billion daily through blockchain payments. The Australian Securities Exchange runs settlement infrastructure on it. AXA processes flight insurance claims in minutes instead of weeks.

Instead of asking "should we use blockchain?" the question now asks, "which applications deliver ROI fastest?"

This guide explains what works and what doesn't, as well as how to apply it without going over budget or schedule.

Scouse

What Changed Since 2023

Three things made blockchain viable for banks and insurers:

• The technology has matured: The speed of transactions went up from 100 per second to over 10,000.. That's enough for most banking operations.
• Regulations caught up: Regulators stopped blocking and started providing frameworks. You can now launch compliant blockchain products in most major markets.
• The cost of waiting became obvious: Banks lost customers to faster fintech competitors. Insurers watched fraud losses climb. Cross-border payments still took 3-5 days, while blockchain networks did it in hours.

Banking Applications That Print Money

Cross-Border Payments

• The old way: 3-5 days, several middlemen, and 5-7% charges
• Blockchain way: Direct settlement, less than 24 hours, and 2-3% fees
• Math that matters: A bank processing $10 billion in annual international transfers saves $30-40 million in operational costs alone.

SWIFT partnered with blockchain providers because they had no choice. Customers demanded faster, cheaper transfers.

Trade Finance

Remember letters of credit? Paperwork going back and forth between banks, exporters, importers, shipping companies, and customs?

Blockchain killed that process.

• Before: 10 days to process trade documentation
• After: 24 hours on platforms like TradeLens

Document fraud costs the industry $40 billion a year. Blockchain made that fraud impossible because everyone can see the same records in real time, and they can't be changed.

Securities Settlement

Here's why this matters: Every day a trade sits unsettled, banks tie up capital as collateral against counterparty risk.

• Standard settlement: T+2 (trade date plus two days)
• Blockchain settlement: Near-instant

For large investment banks, cutting one day from settlement frees $500 million to $2 billion in working capital. That's capital they can deploy elsewhere or return to shareholders.

KYC That Doesn't Suck

Banks spend $500 million per year on identity verification. Customers fill out the same forms at every bank.

Blockchain-based digital identity lets customers verify once and share credentials across institutions.

HSBC's results:

• Verification time: 6 weeks → 24 hours
• Cost reduction: 70%
• Customer satisfaction: Up significantly (nobody likes repeating KYC)

Insurance Gets Automated

Smart Contract Claims

Flight delayed more than 3 hours? Payment hits your account automatically.

Crop damaged by drought? Satellite imagery confirms it, smart contract releases payment.

AXA's flight insurance:

• Claims processing: Weeks → Minutes
• Administrative costs: Down 75%
• Customer complaints: Nearly eliminated

This isn't futuristic. It's live, processing real claims.

Fraud Detection That Actually Works

Every year, insurance fraud costs $80 billion. The problem? Fraudsters file the same claim with more than one insurance company because they don't share information.

Blockchain lets insurers share anonymized claims data. Someone files three auto accident claims for the same incident? Flagged instantly.

Projected impact: 15-25% reduction in fraud losses

Read more: How AI Agent Automates Fraud Detection?

Reinsurance Without the Headaches

Reinsurance involves complex contracts between insurers and reinsurers. Calculating payouts based on claims volume and severity takes months of back-and-forth.

Blockchain platforms automate the entire process through smart contracts.

B3i platform results:

• Processing time: Months → Days
• Reconciliation disputes: Eliminated
• Administrative overhead: Down 40%

Beyond Basic Banking

Asset Tokenization

Take a $50 million commercial property. Tokenize it into 50,000 shares at $1,000 each.

Suddenly, investors who couldn't afford real estate can own fractional shares. The property owner gets liquidity. The bank earns fees as the platform and custodian.

JP Morgan tokenized $300 billion in repurchase agreements. This isn't experimental.

DeFi for Traditional Banks

Banks are launching regulated DeFi products where customers earn 4-8% yields through liquidity provision or lending pools.

The bank manages compliance, risk controls, and customer protection. Customers get DeFi economics with traditional banking security.

Why this matters: Traditional deposit rates sit under 1%. DeFi yields offer 4-8%. Banks that don't offer competitive yields lose deposits.

Supply Chain Finance

Supplier ships goods to major retailer. Blockchain records delivery. Invoice generates automatically. Supplier gets paid immediately at a small discount instead of waiting 60-90 days.

Banks finance these early payments because blockchain provides perfect visibility into transaction status and risk.

Result: New lending opportunities for banks, solved working capital problems for suppliers.

How to Actually Implement This

Most blockchain projects fail because teams don't realise how hard it is or how much blockchain can do.

This is the realistic way:

Phase 1: Pick Your Battle (1-2 months)

Don't boil the ocean. Choose ONE high-value problem where blockchain clearly beats alternatives.

Good first projects:

• Cross-border payments between specific corridors
• Sharing KYC among a group of banks
• Parametric coverage for particular occurrences (weather, flight delays)

Bad first projects:

• "Blockchain all the things"
• Complex multi-party workflows with unclear ownership
• Use cases where databases work fine

Make a financial model that shows how to save money or make more money. Aim for a return on investment in 18 months and an annual benefit of $5 million to $50 million, depending on the size of the institution.

Phase 2: Choose Your Tech (2-3 months)

Platform options:

• Ethereum: The most developed ecosystem with the most developers available
• Hyperledger Fabric: Made for businesses, with strong privacy settings
• Corda: Made just for the financial services industry
• Custom: Only if you have compelling reasons and deep expertise

Most institutions should start with existing platforms. Building custom blockchain infrastructure is expensive and risky.

Design a hybrid architecture that integrates with existing core systems. Don't create new silos.

Phase 3: Get Regulatory Approval (3-6 months)

This phase kills more projects than technology issues.

Engage regulators early:

• Show them your compliance approach
• Explain risk management
• Demonstrate audit trails and monitoring
• Prove data privacy protections

Regulators appreciate proactive engagement. They hate surprises.

Phase 4: Pilot Small (3-4 months)

Launch a limited pilot with real transactions but controlled risk exposure.

Test performance, security, user experience, and integration. Expect problems. That's what pilots are for.

Successful pilots show that the idea works and bring up problems with how it will work before it is fully put into use.

Phase 5: Roll Out Gradually (6-12 months)

Expand to full production while maintaining parallel legacy systems initially.

This phase requires change management. Employees need training. Processes need documentation. Support teams need preparation.

Total timeline: 18-30 months for complex implementations (securities settlement, trade finance)
Simpler use cases: 12-18 months (KYC sharing, parametric insurance)

What Still Sucks About Blockchain

Regulatory Fragmentation

Different countries classify blockchain products differently. A tokenized security might be:

• A security in the US
• Property in another country
• Completely prohibited in a third

Global institutions must design systems flexible enough for multiple regulatory frameworks simultaneously.

The upside: Institutions navigating this complexity build competitive moats that smaller players can't replicate.

Interoperability Gaps

Moving an asset tokenised on Ethereum to Hyperledger Fabric is not easy. There are cross-chain protocols on the way, but real interoperability won't happen for another two to three years.

Choose technologies that prioritise interoperability to avoid having to move to new ones later at a high cost.

Talent Shortage

Finding people who understand blockchain, financial operations, AND regulatory requirements is hard.

Solutions:

• Internal training programs
• Partnerships with blockchain specialists
• Hybrid teams (traditional finance + technical talent)

The shortage creates opportunity. Professionals with blockchain skills command premium compensation.

Security Concerns

Hacks cost DeFi $3 billion between 2022 and 2024. There are flaws in smart contracts.

Mitigation:

• Rigorous security audits
• Conservative smart contract designs
• Insurance covering smart contract failures
• Continuous monitoring

The Bottom Line

Blockchain in BFSI crossed from experiment to production infrastructure.

The institution's winning didn't wait for perfect clarity. They:

1. Identified expensive problems blockchain solves better than alternatives
2. Built proofs of concept
3. Engaged regulators proactively
4. Deployed solutions that work

Blockchain isn't a differentiator anymore. It's becoming table stakes for operational efficiency.

Banks still running trade finance on paper lose deals to competitors offering 24-hour processing.

Insurers manually processing claims lose customers to providers offering instant parametric payouts.

Financial firms with week-long settlement lose margin to platforms offering same-day settlement.

The question isn't whether or not to use blockchain. It's which use cases give the best return on investment (ROI), how to deal with rules, and which partnerships speed up time to value.

The technology is proven. The ROI cases are documented. The regulatory path is increasingly clear. What's missing is your implementation plan. Connect with our experienced team at Codiste and get your project started and running.