FormFree President Eric Lapin: If You’re Not Using Blockchain in Financial Services, You’re Already Behind

Remember just a few years ago when companies were hesitant to embrace cloud computing? Now, cloud-based strategies are standard industry-wide. I foresee the same destiny for blockchain technologies, and the revolution is already underway.

Eric Lapin

Everything is moving onto the blockchain, from artwork to music to social media, and the financial services industry is also getting on board. If you’re still uncomfortable even talking about blockchain, it’s time to get conversant in its core facets, or else you’ll be left behind.

In a March 2023 report, Citi predicted that by 2030, the blockchain securities market could be as large as $4-5 trillion, with blockchain-based trade finance volumes accounting for another $1 trillion. Providers of mortgage, auto, home-equity and business financing, as well as buy-now-pay-later arrangements, should be ready to adapt. If financial institutions are not well-informed about blockchain, they will eventually be gobbled up for pennies — if they survive at all.

Key blockchain concepts to know

Simply put, blockchain is a form of distributed ledger technology that securely records, tracks and stores information across a network of computer systems. There is no singular “blockchain.” Much like databases or networks, there are as many versions of blockchain as there are industries, products and use cases that need them. Here are five key characteristics of blockchain that financial services executives should become familiar with today.


Blockchain networks can be centralized, distributed or fully decentralized. In the decentralized model, blockchains are public or peer-to-peer rather than private, so that every member of the network has a copy of the exact same data in the form of a distributed ledger.

Decentralization in blockchain provides several advantages, including improved data reconciliation and fidelity thanks to consensus mechanisms that ensure all members of a blockchain agree on the state of the ledger. If any member’s ledger is altered or corrupted in any way, data asymmetry is quickly detected and rejected by the majority of the network, making it more difficult for cybercriminals to tamper with the data or carry out identity theft.

You may have seen blockchains referred to as “trustless” systems, but this isn’t meant to imply they are untrustworthy. Rather, decentralized blockchains are so radically transparent that trust is unnecessary. Instead of a centralized gatekeeper telling members what to believe, all members can see the truth for themselves. It’s a model that could help close the longstanding  trust gap between financial services providers and consumers.

Decentralization also reduces workload and spending on traditional data management systems by automating time-consuming tasks. Downtime and network failures are virtually eliminated, because with decentralization, there is no single point of failure. All information is digitally distributed; if one source is unavailable or a user faces system bottlenecks, others on the blockchain network can step in to pick up the slack.

Example: Open-sourced liquidity protocols allow users to lend, borrow and earn interest on deposits. Thanks to the decentralized nature of the platform, both lenders and borrowers can enjoy complete anonymity while participating in policy- and decision-making on a decentralized blockchain network.


Tokenization refers to the process of creating a digital token that represents a real-world asset or utility, which can then be traded or exchanged on a blockchain network. Most people already use tokenized data in their daily lives.

One of the most significant benefits of tokenization is the increased privacy and security of personal data. By using cryptography to generate digital signatures that prove ownership and authenticity, tokenization eliminates the need for third-party intermediaries, reducing the number of times sensitive data changes hands. This increased security and privacy makes data-sharing more convenient for consumers. Moreover, with tokenization protocols, consumers gain transparency into who is reviewing their information and what decisions are being made.

Tokenization also allows for greater liquidity and accessibility to assets that have been previously illiquid or difficult to share with financial services providers. People can now exchange personal data on a secure network at any time using their mobile device or computer, resulting in more streamlined financial services transactions. In short, tokenization has the potential to revolutionize the way assets are traded and shared.

Example: Payment processing tools and mobile wallets like Google Pay and Apple Pay tokenize sensitive credit card information to support secure digital transactions. Tokenization enhances security in contactless payments by offering customers a convenient, digital method to complete transactions without exposing sensitive financial information to merchants or other external parties.


Fractionalization is a unique characteristic of blockchain technology that involves dividing an asset into smaller parts, which can then be traded or owned by multiple parties. For instance, a physical asset like a piece of art can be divided into fractional ownership units represented by digital tokens on a blockchain.

The primary advantage of fractionalization in blockchain is that it enables more people to invest in an asset, even if they cannot afford to purchase the entire asset outright. With fractionalization, consumers can maintain a tiny piece of ownership based on the value of their investment, allowing them to benefit from an asset’s appreciation over time. Blockchain tokens can also be traded instantly among different parties, providing greater accessibility to a digital asset infrastructure that wasn’t available to consumers until now.

Example: Blockchain enables fractional real estate investing that lets consumers own a portion of a real estate asset without having to buy the entire property. This means individuals with limited capital can invest in high-value properties that would otherwise be out of their reach. Plus, fractionalized investing allows average consumers to enjoy the benefits of owning real estate without the hassles of property management.


Gamification refers to using game-like incentives, such as rewards, points and challenges, to engage users on a blockchain network. These elements create an immersive and enjoyable user experience that can help financial services providers engage previously underserved consumers and secure their long-term loyalty.

Example: Acorns’ “round-up” model is a prime example of gamification in financial services. By allowing users to automatically invest spare change from their everyday purchases, Acorn incentivizes more consumers to save and invest, driving more business to financial institutions.


Blockchains allow users to transparently verify their identity and share it as a secure token to gain access to features or services on a network. Data included in identification tokens can range from a ledger of e-commerce transactions to social media activity, Netflix and Spotify usage, biometrics and much more. Consumers retain control over what data to share and with whom.

Identification capabilities on blockchain networks allow financial institutions to verify the identity of their customers quickly and securely without the need for physical documents. Using blockchain for digital identity verification can be particularly beneficial for banks and financial services firms that need to comply with Know Your Customer (KYC) regulations. With blockchain technology, financial institutions can securely store customer information and quickly verify it against global databases to ensure accuracy.

Example: Passport aggregates, analyzes and perpetually refreshes all of a consumer’s financial data — including assets, employment, income, public records, credit and rent payment history — in one blockchain-enabled platform. With Passport, consumers can anonymously share their comprehensive, real-time identification data via secure token to providers of financial services instead of rounding up paperwork or PDF records from dozens of sources.

It’s time to face the facts

Not so long ago, the third industrial revolution saw digital technology disrupt conventional business practices across every sector of the economy. The subsequent and precipitous fall of once-powerful companies like Toys “R” Us, Blockbuster, Nokia and Borders taught us what happens to those who aren’t prepared to adapt.

Today the fourth industrial revolution is well underway, ushering in a new era of connectivity and business transformation, and blockchain plays a starring role. According to McKinsey, Industry 4.0 frontrunners — those who adopt advanced technologies  like blockchain and AI by 2025 — can expect a 122% positive cash flow change, whereas companies that fail to evolve could see a 23% downturm.

There’s no time to waste. Consumers are already asking for a more inclusive and streamlined experience in today’s increasingly digital financial marketplace. To effectively educate consumers about how distributed ledger technologies can unlock these benefits, financial services institutions must develop blockchain expertise now.

(Views expressed in this article do not necessarily reflect policy of the Mortgage Bankers Association, nor do they connote an MBA endorsement of a specific company, product or service. MBA NewsLink welcomes your submissions. Inquiries can be sent to NewsLink Editor Michael Tucker at or Editorial Manager Anneliese Mahoney at