BLOCKCHAIN IN BANKING: A REVIEW OF DISTRIBUTED LEDGER APPLICATIONS IN LOAN PROCESSING, CREDIT HISTORY, AND COMPLIANCE

Abstract

This systematic literature review investigates the role of blockchain technology in revolutionizing the global banking sector, with a particular focus on its applications in loan processing, decentralized credit history management, regulatory compliance, interoperability, and institutional readiness. Utilizing the PRISMA 2020 methodology, a total of 134 peer-reviewed journal articles published between 2013 and 2024 were systematically identified, screened, and thematically analyzed. The study aims to provide a comprehensive synthesis of existing research to understand how distributed ledger technologies (DLTs) are being implemented within financial institutions to address longstanding challenges such as inefficiencies in loan origination, exclusion from traditional credit scoring systems, and regulatory complexities. Findings from the review highlight that smart contracts have significantly automated loan disbursement and underwriting processes, leading to faster, error-resistant, and cost-effective operations. Furthermore, blockchain-based credit platforms offer inclusive alternatives to centralized credit bureaus by incorporating decentralized identity (DID) frameworks and alternative credit data, thereby expanding access to finance for underbanked populations. The study also reveals that blockchain improves regulatory compliance through real-time audit trails and automated KYC/AML reporting, although the lack of interoperability, standardized data protocols, and legal clarity remain major impediments. Institutional readiness—driven by leadership commitment, IT infrastructure, and regulatory flexibility—is found to be a critical enabler of successful blockchain adoption. Comparative analysis across regions including North America, Europe, Asia-Pacific, and Africa underscores how national innovation policies and public-private partnerships influence the pace and scope of adoption. Additionally, this review identifies key research gaps, such as limited longitudinal assessments, underexplored SME and rural banking applications, insufficient user experience studies, and emerging areas like quantum-resilient DLT and AI-blockchain fusion. Overall, the study contributes to the evolving discourse by offering a consolidated knowledge base, identifying implementation challenges, and outlining strategic pathways for leveraging blockchain in modernizing banking infrastructure.