Blockchain revolution in the banking industry could allow for cheaper share trading and quicker settlement providing confidence to various participants in times of stress, as blockchain allows participants in a network to agree that each transaction has taken place and to keep a data of all transactions instead of leaving the record-keeping at one central place and how it’s done? Because The blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.
At the heart of a blockchain network is a distributed ledger that records all the transactions that take place on the network. A blockchain ledger is often described as decentralized because it is replicated across many network participants, each of whom collaborates in its maintenance.
In addition to being decentralized and collaborative, the information recorded to a blockchain is append-only; using cryptographic techniques that guarantee that once a transaction has been added to the ledger, it cannot be modified.
The industry is also working on increasing the volume of transactions per second that the technology can handle, which is not yet high enough for public equity markets.
In simple words, a blockchain is a historical record of transactions, much like a database.
We can say that blockchain is revolutionizing the speed and efficiency of transactions. While the application of the technology is still in the proof of concept stage, it could play a positive role in a diverse range of industries and sectors including banking, commerce, healthcare, insurance, and government.
Gautam Jain, the Global Head of Digitization and Client Access at Standard Chartered Bank, said:
“This is revolutionary technology. What we do with the revolution, the industry is still coming to terms with. Hopefully, organisations will be able to harness the power of this technology for the advancement of the society and community, especially banks to make global trade and financial services much stronger to help connect communities and help our societies grow.”
For better understanding, let’s discuss how blockchain works in banking:
A wants to send money to B
The transaction is represented online as a “block”, a coin or a token in a database
The block is broadcast to every party in the network
Those in the network approve the transaction
After validation, the block is added to the chain, which provides an indelible and transparent record of transactions
The money moves from A to B.
User Control: Users are in control of all their information and transactions.
High-quality data: Blockchain data is complete, consistent, timely, accurate, and widely available.
Durability and reliability: Due to the decentralized networks, blockchain does not have a central point of failure and is better able to withstand malicious attacks.
Transparency and immutability: Changes to public blockchains are publicly viewable by all parties creating transparency, and all transactions are immutable, which means that they cannot be altered or deleted.
Lower transaction costs: By eliminating third-party intermediaries and overhead costs for exchanging assets, blockchains have the potential to greatly reduce transaction fees.
What Blockchain Brings To The Table?
The blockchain is a system that brings total and complete privacy, security and efficiency to every user simultaneously. While banks have a traditional total control of how money is transferred and stored in our lives, the blockchain is offering better alternatives with incentives that no bank can match.
In particular, there are three main facets of blockchain-run e-commerce that make it such a lucrative and imperative addition to financing. These can be defined as follows:
The blockchain allows for instant, peer-to-peer transactions at a much more user-friendly cost. What this means is that the blockchain provides services at a personal level, while maintaining secrecy and privacy, yet cutting the middleman out of the picture. For example, if you were to use the blockchain to hire a taxi, the service would be carried out like this: first, you would be given a list of available taxis nearby, each with their own personal ratings given by users, and from this list, you could choose accordingly. Then, once the trip is over, the blockchain would generate a bill, with remarkably lower prices than with contemporary services, because the ‘middleman’ like Uber would not be around to charge their share. The service would be much more user-friendly because it’s all based on user reviews. While it may seem to be no different from the existing fee structure of services like Uber and Lyft, the truth is a little different.
The blockchain is quicker than banks when transferring currency and assets. For a simple overseas transfer, for example, a remittance, the minimum time could range from one to three days when carried out by banks.
The blockchain is an unbelievably secure system. It would take a whole other article to explain just how secure it is and why, so suffice it to say that you can forget about anyone stealing your funds or assets.
What Blockchain Can Do In Banking?
Organizing processes: Blockchain puts all relevant parties into a common digitized infrastructure, allowing faster and more efficient execution of transactions and contracts. For example, a standard mortgage application today involves creating a paper trail between the borrower, loan officer, underwriter and lender, among others. Blockchain may connect all actors, updating ledgers immediately, automatically and transparently.
Removal of intermediaries: Payment transactions traditionally rely on a central processing authority or middleman, which often requires time for settlement. Blockchain offers a transparent and immediate way for two parties to pay each other without depending on central infrastructures such as SWIFT or other payment schemes, so funds are received instantaneously.
Initiate transactions in real-time: Sending funds across international lines through telegraphic transfer or money orders involves a wide set of processes including anti-fraud checks, foreign exchange and clearing of funds. For international commerce hubs to developing regions that may be underserved by brick-and-mortar banks, blockchain promises to create a cross-border network through which money is exchanged at the speed in which information moves today.
Minimize fraud: All data stored in the blockchain is decentralized. This is because the information is not located in one single place, all parties with access to the blockchain have complete transparency, so any wrongful fraudulent activity or a breach in data would be immediately noticeable and traceable.
Efficient verification: Customer information verification and recording costs financial institutions an enormous amount every year. Blockchain allows banks to access all customer information and share with other stakeholder organizations like loan disbursing companies, car rentals, insurance companies, establishing a high efficiency in the compliance process.
Establish an efficient record maintenance system: Blockchain allows for the recording, storing and transferring of data across a common platform. A blockchain can be used for business documents such as contracts, land registry transfers of value, mortgage records, and medical records. That means in the future, all companies and organizations may be able to validate records seamlessly without you have to lift a finger.
How Does This Affect Banking?
The blockchain is less of a tool than a whole new infrastructure to replace the currently existing system, as it is frequently thought to be only compatible with cryptocurrency. The truth is that it is the only existing format for fund transportation that is compatible with both fiat and cryptocurrencies.
Imagine a world where the blockchain was the pre-eminent mode of banking. In such a world, the need for these commercial giants like the banks of today would be nullified and replaced with a better, faster and cheaper system, the blockchain. You would be imagining a world where ‘service charges’ would mean a mere ‘two percent’ instead of the ten percent that banks charge us so unabashedly; you would be a world where global businesses could move funds in a matter of hours; where the reliance on any one central institution would be eliminated.
The Promise Of Blockchain In Banking
Blockchain holds the promise of bringing greater efficiency and transparency to the banking industry, for example, allowing cross-border transactions to be made in real-time and money to be exchanged at the speed with which information moves today.
“Banks should be taking a lead in this because if you look at the original purpose of setting up a bank, it was to connect communities together and facilitate trade and commerce. For the first time, you have a tool to do just that on a global scale which is secure and irrefutable.”
Blockchain-Based Banking Apps Are A Sound Investment
A blockchain-based banking app is a great business opportunity in all regards. It offers enhanced security, speed, monetary benefits, and complete control over financial transactions and data that is sensitive in nature. Investing in such an app reaps returns almost instantly and propels you ahead of the competition while inspiring confidence from customers and prospects.
While it is not really possible to be sure when guessing the attitude of banks towards the blockchain in upcoming years, it can be said without a doubt that they must adapt to the increasing competition imposed by the blockchain in every facet of banking. Also, it can safely be said that banks must learn to use the blockchain or be a stepping stone in its path to glory.
So, make sure that the banks we like to trust so blindly today are not using you and make the smart move today. Make sure to ride the blockchain revolution, in banking, in commerce, and in every field, and be a part of its motion.
If you want to know more about blockchain technology in banking and finance, click here: https://www.cryptonewspoint.com/blockchain-technology-in-banking-finance-boon-or-bane/