How Blockchain Mitigates Reconciliation Requirement

Banking CIO Outlook | Tuesday, January 07, 2020

Reconciliations might soon become a thing of the past in capital markets if blockchain technology is successfully adopted.

FREMONT, CA: Reconciliation practices are essential for any capital market firm. Technological advancements have made reconciliation streamlined, but some constraints persist. Rather than addressing and overcoming challenges in reconciliation, capital market businesses can look to reduce the requirement for reconciliation itself. A possible way to eliminate the need for reconciliation is by giving way for smart contracts. Blockchain holds the potential to revolutionize capital market operations in a way that will manage out the need for record-matching.

Depending on the number of participants involved, reconciliation can become complex and time-taking. Due to the traditional format of sharing information, reconciliation becomes obligatory. Shifting to blockchain-based smart contracts enables parties to stick to rules and defined workflows. Actions are based on the support defined by the smart contracts. Thus, there is sync among participating entities from the workflow prospect. As a result, the process of reconciliation stays in the background, without the need for any committed reconciliation solution.

The idea of sharing a ledger guarantees real-time validation of transaction-related information. On top of that, the ledger serves as a permanent record. For capital market companies, the requirement for reconciliation is completely eliminated since trade data is safely circulated without any uncertainties of manipulations.

Some capital market businesses might have opinions regarding cybersecurity issues. However, employing smart contracts does not make trading organizations exposed to security attacks. Data privacy and confidentiality are essential characteristics of blockchain technology. Thus, blockchain will be able to help capital market firms let go of reconciliation. Concurrently, companies can ensure security and affordability while executing business processes. Overall, blockchain helps solve concerns of risk, cost, and reconciliation, enabling hassle-free, minimum latency capital markets trading.

See Also: Top Reconciliation Platform Companies

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