By Joey Ricard - August 17, 2022
The popularity of blockchain is growing rapidly over the years, and it seems like many industries can benefit from it. Already a lot of startups are emerging based on blockchain technology. Even blockchain in banking and finance is becoming super popular!
With the advancement of technology in every sector, the finance industry is no longer behind. It is one of the areas where technology is making significant impacts and will continue to do so in the future.
One such technology causing a storm in industries all over the globe is blockchain technology. Although it is still in its early stages, it is believed to be a game-changer!
Rumor has it that blockchain in finance and banking can be so revolutionary that it can innovate and change the entire finance and banking scenario within the coming years. Continue reading to know in detail.
A blockchain is a decentralized, irreversible database that allows permanent documentation of all network transactions in blocks. It completely discards the intervention of any third party.
The technology is openly distributed on a ledger, and it helps in efficiently recording the transactions between two parties without any fail and error. It contains several individual blocks of data that include a particular set of relevant transactions connected in a specialized order.
There are also ample benefits of blockchain technology that can completely disrupt the financial and banking industries.
For example, all the parties involved in blockchain in banking can share digital registers across computer networks without requiring a centralized intermediary or authority.
And that is why the transactions that take place through blockchain happen much faster. Well, speed is one of the many benefits of blockchain for the finance industry. Blockchain also brings a new level of security to the industry.
Still wondering what makes the combination of blockchain and banks or financial institutions so popular and significant these days! Then, let us take a closer look at some of the major reasons for the popularity of blockchain in banking and finance.
With blockchain-based payment systems, financial institutions can utilize developing technologies to process financial transactions more quickly.
Since blockchain offers a high-security system and lowers the transactional cost, this decentralized network for payments is likely to introduce a completely new level of service and help bring new products to the market.
By adopting this latest technology, financial institutions can also give an edge to the competition that innovative fintech startups bring to the table.
Furthermore, with blockchain in the banking industry, banks will also be able to lower the need for third-party authentication and speed up the process for conventional transactions.
A scattered ledger technology, like that of blockchain in banking, can allow direct settlement of bank transactions and help better tracking than former protocols like SWIFT (Society for Worldwide Interbank Financial Telecommunications).
A normal bank transfer usually takes up to a few days to happen since it is restricted by our financial infrastructure. Migrating money around the globe is a logistical difficulty for many financial institutions.
Even a simple transfer requires undergoing a series of complex intermediaries like custodial services before it reaches the final destination.
But the decentralized nature of blockchain enables banks to record all the transactions openly and transparently. No transaction has to go through regulatory bodies or custodial services like SWIFT.
Every transaction can be simply settled directly on an open blockchain!
With the arrival of blockchain in banking, the intervention of any middleman or third party is discarded. As a result, the fees for exchanging assets have also reduced significantly.
Sources tell that transferring assets on a blockchain can help save up to $17-$24 million each year in global transaction costs.
Yes, blockchain technology in banking is expected to transform the financial industry by developing a decentralized register of digital assets. A dispersed ledger enables you to transfer the rights of an asset via cryptographic tokens.
Cryptocurrencies like Bitcoin, Ethereum, etc., achieve that with complete digital assets. But many blockchain companies are working towards tokenizing assets like real estate and gold as well.
It is a complicated process to raise funds through wager capitals nowadays!
Most of the time, entrepreneurs put the decks together, attend endless meetings and follow unending negotiations over equity and valuation.
But even after doing all these, it doesn’t assure you the funds.
But with blockchain in banking, it is possible to accelerate all these processes. These include Equity Token Offerings (ETO), Initial Exchange Offerings (IEOs), and Security Token Offerings (STO).
One of the most popular choices for raising funds currently is STO since it is protected legally. To benefit from STO, every project needs to undergo a due diligence procedure. So, with all these options available, fundraising for businesses can be fun!
Regular banking services approve loans by utilizing the system of credit reporting. With the adoption of blockchain technology, the future of P2P loans looks faster and more secure.
Banks that deal with loan applications predict the risk by analyzing factors like credit score, the status of homeownership, the ratio between debt and income, and so on.
To access consumer information, banks ask for the consumers’ credit reports from dedicated agencies, which can cause leakage of sensitive information and is very harmful to consumers.
But blockchain in banking provides a more efficient, secure, and cost-friendly way of approving loan applications.
No financial institution can carry out digital transactions without authenticating the identity of the users. However, this identity verification process has several steps and is very hectic.
But, this is also important for security purposes and should not be avoided.
However, you can speed up all these processes by embracing blockchain in banking. And that is because blockchain will allow you to reuse the id authentication for multiple services without compromising the security.
Also, blockchain lets users choose their preferred method of verification and with whom and how they want to share their identity. They have to register only once, and that’s it. Plus, it also ensures strong security.
The finance and banking sector believes that blockchain is truly their future as it has the potential to address several challenges that it is facing right now!
And that is why the demand for blockchain in banking and finance is growing tremendously. Embracing blockchain can allow financial institutions and banks to offer more security to their customers and provide them with better and faster services. Thanks to blockchain, many financial organizations have achieved a position to become more competitive in the finance sector and improve their operations.
Are you eager to implement blockchain in your business, too? Then get in touch with us right away! We have the team, the experience, the expertise, and the tools to help you implement the latest and futuristic technologies to drive innovation in your business!
Joey Ricard
Klizo Solutions was founded by Joseph Ricard, a serial entrepreneur from America who has spent over ten years working in India, developing innovative tech solutions, building good teams, and admirable processes. And today, he has a team of over 50 super-talented people with him and various high-level technologies developed in multiple frameworks to his credit.
