The Importance Of Blockchain In The Banking Sector
Blockchain
05Jul 2018
The blockchain technology is unique and has found its way into many industries. Using blockchain in these industries will result in huge industrial disruptions in 2018 and beyond. This technology allows for meaningful collaborations will create lasting impacts in these industries. Thus, its use in the banking will without doubt result to better banking transactions and systems. More so, it will create efficient and effective banking systems for better service delivery. Most blockchain companies leverage on its versatility to provide services unique to the baking sector.
Today, blockchain is considered as the heartbeat of the financial sector by the World Economic Forum. This indicates that this technology will play significant roles in the financial sector. Hence, brings about a technological revolution which will change the banking sector for good.
What is blockchain technology?
Blockchain development is made up of several unique technologies. These technologies work collectively to create well-organized ledger records called blocks. These blocks via encryption link together to deliver frameworks for safe and secured online transactions. To this end, parties in exchange can carry out transactions over the internet without fear of fraud. More so, this is a database technology that will disrupt banking services and systems for good.
Due to this, the blockchain technology has seen massive investment running into billions of dollars. This will grow due to the massive support this technology has across countries around the globe.
How blockchain impacts on the banking sector
Although blockchain has been around since 2009, nobody envisaged its use in the banking industry. Today, it has become the technology to beat in almost in the financial industry. Here are a few ways it can impact on the banking industry.
1. Fast-paced financial transactions
Majority of third-party financial transactions in the banking industry consume lots of time. This time could range from few days to even weeks. These transactions take place via payment gateways can be replaced with blockchain technology. Thus, this offers the opportunity for a widespread real-time payment solution. With this, transactions via blockchain will only take few seconds to complete between the parties involved. Hence, this eliminates third-party payment gateways and results in fast-paced financial transactions.
2. Lower cost of financial transactions
The use of blockchain technology in the banking sector will lower the cost of financial transactions. The truth is; the long time required to complete financial transactions results in high monetary cost. Fast-paced transaction and eliminating payment gateways will result in low financial transaction cost. More so, this will end third-party charges from all financial transaction in the banking industry. This will benefit businesses as well as individuals who perform financial transactions daily.
3. Reduction of fraud
The use of blockchain in the banking sector can help reduce fraud. Blockchain offers hope because 45% of financial intermediaries are prone to economic crime. Across the globe, banking systems are designed to function via a centralized database. Hence, they are vulnerable to serious cyber attacks due to its many points of failure. The truth is; all a hacker needs to gain access to the system to breach it. Once this happens, fraud is eminent if such breach is not noticed on time.
Hence, blockchain companies can help design blockchain systems to mitigate financial fraud. The truth is; blockchain can cut down on the massive fraud in the banking sector. This is true because it is a distributed ledger system where each transaction block has its timestamp. More so, it is a technology that links each block of transactions to past transactions. Thus, it can checkmate and at the same time cut down crimes in online financial transactions. Hence, it offers better opportunities that can help reduce fraud in the banking industry.
4. Establish smart contract
Blockchain technology has the ability to store enormous digital information. Thus, it establishes a smart contract in a given transaction once parties involved insert their unique keys. Hence, banks and blockchain companies can collaborate to create contracts for any completed transaction. This becomes possible if those involved fulfill certain set criteria for such transactions. Hence, meeting these criteria establishes a smart contract for all completed financial transaction.
5. Helps financial institution to Know your customer (KYC)
Across the globe, banks spend a maximum of $500 million yearly for know your customer campaigns. More so, the due diligence regulations cost financial institutions a fortune to maintain. These regulations checkmate against terrorism and money laundering but cost a fortune. Blockchain technology offers transparency and verifiable financial transaction with ease. With blockchain in the financial industry, individuals and banks can access their transactions. No one can delete or tamper with transactions done via blockchain technology. The truth is; financial institutions and individuals can have every transaction history with ease. This is so because this technology locks each transaction with a timestamp. As such, one can verify each transaction over the internet with ease. This helps the financial institution to know their customers via transparent and verifiable transactions.
6. Helps eliminate fraud in trading platforms
Trading platforms of financial institutions are prone to operational errors as well as issues of fraud. Top blockchain development companies have developed unique technology that can disrupt these occurrences. blockchain technology can drastically reduce operational errors and fraud on these platforms. Thus, makes trading on these platforms safe and secure for exchangers. More so, the use of blockchain on these platforms will reduce cost and improve the system’s efficiency.
Conclusion
This unique technology offers the banking industry many unique opportunities. But certain challenges must be overcome for noticeable impacts to occur in the banking sector. To deploy this technology in the banking sector, it must conform and follow recent privacy laws. This is necessary to protect individual and organizational data as well as the safety of such data.
More so, the need for regulatory functions and oversight needs to be addressed by relevant authorities. The financial sector is synonymous with huge data. Hence, data scalability must be sorted out prior to deploying blockchain in the financial sector.
In summary, blockchain can impact and revolutionize the banking sector. The only thing needed is its right application and use.
Harnil Oza is the CEO & Founder of Hyperlink InfoSystem. With a passion for technology and an immaculate drive for entrepreneurship, Harnil has propelled Hyperlink InfoSystem to become a global pioneer in the world of innovative IT solutions. His exceptional leadership has inspired a multiverse of tech enthusiasts and also enabled thriving business expansion. His vision has helped the company achieve widespread respect for its remarkable track record of delivering beautifully constructed mobile apps, websites, and other products using every emerging technology. Outside his duties at Hyperlink InfoSystem, Harnil has earned a reputation for his conceptual leadership and initiatives in the tech industry. He is driven to impart expertise and insights to the forthcoming cohort of tech innovators. Harnil continues to champion growth, quality, and client satisfaction by fostering innovation and collaboration.
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