By integrating shared databases and cryptography, blockchain is enabling bankers and financiers to have synchronous access to a regularly updated digital ledger that cannot be manipulated.
FREMONT, CA: Blockchain has been the buzz talk for most of the industries as it is a powerful technology that is empowering virtual currencies to be open, secure, and protected. One of the most discussed-about topics in the financial services industry today is blockchain banking. It will facilitate banks to process payments more speedily and more accurately if adopted while lessening transaction processing costs and the necessity for exceptions. To thrive on this potential, banks need to create the infrastructure required to build and operate a reliable global network applying solutions based on blockchain. The blockchain could conceivably save banks billions in cash by dramatically mitigating processing costs. Banks are keen to grasp the opportunity to lessen transaction costs and the amount of paper that they process. Implementing blockchain would be a start to making banks increasingly profitable plus valuable. According to a survey, use of blockchain is top of mind amongst banking executives who lead payments businesses. There are several reasons how the financial and banking industry could benefit from the blockchain.
• Fraud Reduction
Blockchain is acknowledged as the modern technology that will lessen fraud in the financial realm, where 45% of financial intermediaries like money transfer and stock exchanges services are slanted towards financial crimes routinely. Maximum banking systems in the world are built on a centralized database and are more vulnerable to cyberattack because once hackers attack one system, they get full access. This technology will get rid of some of the prevailing crimes committed online today against the financial institutions.
• Know your Customer (KYC)
According to a survey, financial organizations spend anywhere from $60 million up to $500 million per year to keep up with KYC and client due to diligence regulations. These regulations mitigate money laundering and terrorism exercises by having requirements for institutions to verify and identify their clients. Blockchain allows an institution to access the verification details of a client by a different organization, avoiding repetition of the KYC method. The decline in administrative costs for compliance departments will become significant.
• Smart Contracts
Blockchains expedite smart contracts as they facilitate storage of any digital information, including computer code that can be administered once two or more parties access their keys. Contracts could be designed and financial transactions executed when this code is programmed, according to the set criteria.
• Trade Finance
Trade finance is still primarily based on paper, such as letters of credit or bills of lading, being sent by fax or post around the globe. Many think that blockchain is a reasonable solution, especially as multiple parties need access to the same information. This is an indispensable element of the supply chain, and blockchain offers an immense amount of features in this area.
Blockchain disruption could be profoundly transformative in the payments method. It allows banks higher security with minimum lower costs to process payment between businesses and their clients and even between banks. Blockchain will get rid of all the intermediaries in the payment processing system.
Blockchain and distributed ledgers have a radiant future. As trusted platforms, real-time and open-source that securely transmit data and value, can help banks alleviate not only the cost of processing payments but create new products and services that can generate significant new revenue streams. The key to turning blockchain's potential into reality is a collaborative endeavor among banks to create the network required to support global payments. Banks need to look at the more excellent picture and work together with non-banks to define the backbone that can underpin a globally accepted, ubiquitous global payment system that can modify how banks execute transactions.