The Impact Of Blockchain On Banking Sector
Right after Bitcoin came on the world view, we saw another technology emerging. It was blockchain. As soon as it came into existence, it created a lot of disruption and we saw it gaining a lot of popularity. A lot of research was done on the blockchain technology and people predicted various use cases across multiple industries where it could be used. Right now, blockchain is being used for payments, money transfers, monitoring supply chains, land records, and a whole plethora of purposes.
What is Blockchain Technology?
To explain blockchain technology, we will use the analogy of Google Docs. If you are an AI app development company or any other business, when you work on Google Docs, you create a document and share it with your colleagues. When you share it, you don’t make copies of it and send it to everyone. You distribute the document instead. This gives everyone the right to work on the document and make any changes that they want without the need of making copies. All the changes are transparent, real-world, and decentralized. You don’t have to wait for someone else to finish their work. All the changes are recorded in real-time. The entire history of the document is available and it is unalterable.
Now, we are not saying that blockchain is the same as Google Docs, but it is a good example to show the basic features that this technology provides us. These are:
- All assets are distributed and not copied.
- All assets are decentralized.
- All the changes and modifications are done in real-time.
- The history of the asset is unaltered and transparent and easily viewed at any time. This keeps the integrity of the asset intact and increases trust.
- The number of risks goes down as well as the chances of fraud.
Blockchain technology has revolutionized the finance industry as well as other industries. Nowadays, it seems that every financial institution is looking for a Blockchain technology company to integrate this technology with their systems. It is safe to say that no fintech technology has ever made such a mark on the industry as Blockchain. It has become so popular that banks and other financial institutes are now finding it hard to stay relevant without it.
BlockChain and the Financial Industry
Interestingly enough, there was an HBR study that stated that BlockChain technology will do to the finance sector what the internet did to traditional media. When the internet was born, it was said that soon people will be using it to get their information rather than reading newspapers and magazines. In the beginning, traditional media scoffed at the idea but soon realized that it was true. But the financial sector need not worry. Blockchain technology is not here to make them obsolete. It is here to enhance their functionality and give them more power and scope.
Blockchain technology offers them transparency, safety, and decentralization. Also, it is much cheaper than the traditional systems that they have for all the above purposes. As all financial institutions are concerned with highly confidential data about money, they will feel more safe and secure once they have this technology integrated with their system. All they have to do is to contact a custom software development agency that can deliver what they want. BlockChain also offers reliability.
Benefits of Blockchain Banking Sector and Financial Institutions
BlockChain offers a plethora of benefits to all businesses related to the banking and finance sector. These include:
Banks and other financial institutions will enjoy more security and transparency at lower costs. This will not only increase their own productivity and efficiency but also increase customer satisfaction. According to one prediction, this technology can ultimately save around $15-20 billion by 2022. When banks and other financial institutions start using smart contracts, they will greatly reduce the cost of executing traditional contracts as well as maintaining them.
Not only will this technology lower the costs of financial transactions, but it will also greatly lower the time it takes to conduct these transactions. With the use of blockchain technology, banks only need to make ledger entries to move money or other assets. This greatly reduces the transaction time. Instead of waiting for days for a transaction to be confirmed, customers will get the confirmation in mere hours or even minutes. That is because these transactions are done in real-time.
For banks and financial institutes, the most important thing to consider in any kind of transaction is security. When these institutes integrate blockchain technology with their systems, they will be able to provide much better security to their clientele. A centralized system cannot guarantee the kind of protection and security that a decentralized system like BlockChain can offer.
Improved data quality
Right now a lot of the banking data has multiple copies. This means that various parties have their own copies of transactions and they can make any alterations to the information that they want and no one would be the wiser. With BlockChain by your side, this can be easily eliminated. When data is in a decentralized location, no one would be able to make any changes to the data without everyone knowing about it. Also, there would be no chance of the data becoming out-dated or incomplete.
Right now, there is an aura of fear surrounding the banking and finance sector related to BlockChain technology. But it shouldn’t be the case. The quicker these institutions adopt this technology, the more benefits they will reap and the more relevant services they can provide to their customers.