Blockchain is disrupting everything ranging from payment transactions to how money is raised up in the private market. Will the conventional banking industry hold this technology or be swapped by it? Let us find out as blockchain in the banking and finance sector is disrupting the old-fashioned routines.
A blockchain is a decentralized, unchangeable database that helps in enabling the recording of network transactions. Blockchain is growing in popularity in the past few years as a technology that may be incorporated into a variety of industries. And there are many startups built on this technology. Blockchain in the banking and finance sector is providing for the permanent recording of transactions in a block. It removes the need of third parties.
Also read: Digital Transformation Examples in Banking
Benefits of Blockchain Technology
In principle, blockchain might be revolutionizing the banking and financial industries. It is having the potential to cause substantial transformation in the financial industry.
- Transactions are being processed more speedily and at lesser prices.
- There are no distributers (middlemen) in the process of transaction authorization.
- As a result, decentralization and autonomy from central repositories.
- Therefore, this will be resulting in less paperwork and bureaucracy.
- Transparency
- Integrity of data
- Security
Blockchain in International Payments
If you want to initiate a payment utilizing your bank account, it may take several days to conclude. On the other hand, the transactional cost of sending a payment internationally might be expensive. When it comes to blockchain finance, equally central and commercial banks throughout the globe are able to implement the new technology. In order for processing payments and maybe issuing their own digital currencies. Conventional technologies are slower and manual and more expensive than bank blockchain for cross-border payments. Blockchains are international ledgers that are not limited by borders and do not need middlemen. Regardless of whether the transaction is regional, local, or cross-border, the slowest blockchains help in finishing a transaction in as little as 15 minutes. Where as the fastest blockchain technology can achieve it within a few seconds.
Blockchain in Lending
Blockchain in the banking and finance sector could also be used in lending. Syndicated lending is when an association of lenders, generally banks, offers loans to individuals (a syndicate). Because of the several parties included, standard bank processing of syndicated loans takes longer days. Moreover, certain rules, such as Anti-Money Laundering (AML) and Know Your Customer (KYC), are ought to be followed by financial institutions (AML). Due to the large number of parties concerned, authorizing a syndicated loan will be taking a long time.
Blockchain in Trade Finance
A number of trade finance activities, even in today’s disruptive era of technology, still entail a lot of paperwork. Every middleman in an international trade used to prepare all documents on their own for keeping their ledger up to date with the present news. A single ledger may be sustained and regarded by all parties involved in a transaction, and it can be updated in real-time with real-time information. Also, by removing time-consuming paperwork and bureaucracy, blockchain-based trade finance can help you in streamlining the complete trading process.
Blockchain in Accounting, and Audit
Standardization utilizing blockchain would be supporting auditors in automatically validating the most vital data in financial accounts, decreasing costs and thus, saving time. Blockchain in the banking and finance sector will be making it simple for proving the integrity of electronic files. Certainly, one approach is to build a hash string for a file that will be showing its digital fingerprint. Next, then writing that hash string onto the blockchain as a timestamp.
Credit Reports on Blockchain
Furthermore, data verification costs and issues are mitigated with blockchain-based credit reports. Also, because the data is no longer sustained in a central repository, it is then returned to individuals. Therefore, before agreeing to a loan, mortgage, or credit card, a bank should run a number of checks for ensuring that you have the financial capability for repaying the money as well as consenting to the terms of the agreement, such as interest.
Blockchain In Stock Trading
Blockchain-based trading transactions are eliminating data redundancy. And hence, it is boosting the performance. As an outcome, minor transactions among groups of traders can be maintained quickly outside of the blockchain, with only the concluding transactions being kept on the blockchain. The implementation of blockchain for stock trading can considerably remove the necessity for intermediaries. Regulations may be willingly put into smart contracts and deployed, in the absence of a third party. Therefore, making sure that no one can cheat another.
Also read: The Role of Blockchain in Mobile App Development
Beyond the Hype of Blockchain Technology
Disruption will not be happening overnight, and much of blockchain in the banking and finance sector has yet to be achieved or broadly tested.
Die-hard believers are expecting blockchain and cryptocurrencies to swap banks altogether. Others are wondering that blockchain technology will be supplementing traditional financial infrastructure, hence, making it more efficient and effective.
It remains to be observed to what extent banks will adopt the technology. One thing is clear, nonetheless: blockchain will indeed be transforming the industry.
If you aren’t already a client, contact us for a free call to learn more about our platform.
