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Banking Industry sees a great potential in blockchain technology to overcome its current issues like fraud prevention, secure transaction, and loss of data to customers. The blockchain is a distributed ledger that stores data of every transaction in an encrypted form and the stored data is immutable but can be viewed by entities over the chain. Below are discussed a few ways in which blockchain would benefit the banking industry.
Elimination of Third Party
Currently, the banking industry relies on a centralized storage system which is highly prone to cyber attacks and hackers can easily get the hands on the sensitive data. Decentralized ledger of blockchain seems to resolve this as the data is distributed over the network and since the transaction in the network is peer-to-peer and automatically eliminates third-party intervention resulting in no loss of data to customers.
Security and Transparency
Blockchain auto-authenticates its users which mean that entities over the blockchain network will be validated prior to utilizing it eliminating fraudulent users and transactions. Also, the technology stores the data of each transaction within the chain, immutable but can be viewed by all entities over the network providing the required transparency.
Client Identification System
All banking organizations require KYC details for verification of its consumers and customers also need to provide these details multiple times to each organization creating silos of personal data. Blockchain’s distributed ledger would facilitate customers to record their details securely at one place and share them with the respective banks. Such a process will build trust between banks and customers and also provide ownership over data to the customers.
Modify Loans and Credits
Banking and financial services go hand-in-hand but lack a reliable system to operate on. A distributed and decentralized system can be a solution to this as this will firstly eliminate rule over and also be immune to bankruptcy since one organization would not control deposits. Funds will get distributed ensuring more security against fund scams and the more trustable system will get established between banking and financial services.
Penetration of Cryptocurrencies
Cryptocurrencies are till date the most popular and successful application of blockchain technology and with banks embracing blockchain would result in penetration of cryptocurrency as well. Few banking organizations have already started to experiment and integrate cryptocurrency like bitcoin in their banking system and if the outcomes will be satisfactory than more such utilization will be observed.
See Also: Financial Services Review