How Blockchain Is Reshaping the Banking Industry

Category: Education

Have you been into banking and investing over the past few years? Perhaps, you might be familiar with the term blockchain. Yes, blockchain is the distributed ledger technology, which facilitates recording transactions and tracking assets in any business network. Its advanced features like transparency, immutability and decentralization have been beneficial to all industries globally. Blockchain can transform the banking process in a more secure, reliable, efficient, transparent and flexible way. Banking is the most popular domain of blockchain because of security concerns. The transparent secured nature of blockchain is the sole reason for its adoption into various industries for growth and development. Blockchain could be specifically competent in fixing the most noticeable problems encountered by the banking industry. Let us list those problems and the ways Blockchain technology can help, below: 1. Enhanced Security and Fraud REDUCTION Banks and financial companies around the world are continually annoyed with incidents of cyber attacks and financial crimes like bank account hacks, data leakage, and fraud, just to name a few. Blockchain technology is developed on cryptography standards of hash functions, private keys, and public keys. This helps banks abstain from the attacks from hackers and fraudsters, and secure transaction data. Since Blockchain technology allows quicker transactions, it means there is less time for hackers to intrude. 2. Quicker Payments and Transactions Conventional banks allow the transfer of money throughout the world. Nevertheless, the present system takes at least 1 to 3 days in verification and settling transactions between 2 parties. Blockchain allows money transfer by easy ledger entries without requiring a centralized mediator for verifying it. This implies banks can utilize a Blockchain-based solution for lowering the time needed for verifying and resolving transactions. With the advancement of technology, transactions can also happen in real-time. Hence, banks can lower their processing time and provide their clients access to borderless, quick, and affordable payments. 3. Authentic and Enhanced Data Quality Banks need to keep up with a massive amount of information. In the conventional structure, the issue occurs because a lot of banking data lies in more than a single place. Thereby, many parties in several areas can change the same data. This leads to either outdated or incomplete data. This is an easier description of what occurs in real but the fact is that the systems are much complicated and it leads to chaos when the information is ill-maintained. Modern Blockchain technology can preserve any type of data. The utilization of Smart Contracts moreover allows data for being used and transformed just as per the pre-decided rules. 4. Enhanced Credits and Loans Conventional banks provide loans depending on your credit rating that is offered by third-party companies. This type of system is sometimes unfavorable to clients that might affect their capacity of getting loans badly. Using Blockchain in the banking sector, financial entities can get a decentralized and cryptographically safe registry of the last payments of a user. They can utilize this for measuring the global credit score and offer loans more effectively and cost-effectively to a wide array of clients. 5. No Complicated Paperwork A lot of paperwork is engaged in the great majority of financial affairs. And maintaining invoices, bills, and contracts is responsible for this involvement. The concept of Smart Contracts influences Blockchain technology for making contracts that decide, terminate, and update the values of stipulations. This type of technology can ease the bulk of the bureaucracy and make all financial transactions hassle-free. 6. Lowered Expenses When it comes to doing transactions and interactions, the conventional banking sector has many middlemen and intermediaries. These interactions with middlemen maximize the ultimate expense of a transaction. The utilization of Blockchain in banking helps perform admin functions, maintain and carry out contracts. This helps lower the communications with intermediaries. As a result, this helps decrease entire expenses.