Blockchain in Banking and Finance
It seems that people still associate blockchain mainly with BitCoin and other cryptocurrencies, while the potential of this technology goes far beyond that. We have already written about the opportunities it brings to logistics, healthcare, gambling, and the public sector. In this blog post, we want to speak about the advantages of blockchain in banking.
Benefits of Blockchain Technology in Banking
Just a short reminder: blockchain is a chain of blocks sharing the same encrypted data. This technology makes all the data protected, immutable, and easy-to-verify. It can drive data security across various industries to a brand new level eliminating fraud and mistakes. Since the banking industry is one of the most suffering from scammers attacks, implementing blockchain in financial services may save the day. Here are the core pros of blockchain in banking:
Financial blockchain covers a range of security issues. First of all, it eliminates the chances for hackers to attack the database and steal the information in order to demand a ransom from banks or take its users’ money. Since the data is spread across multiple nodes, there is no particular server or another place to attack.
The encryption technology also makes it easy to identify users and detect hackers.
Transactions and other banking operations today take a lot of time for management, approval, logging and some of the actions are still performed manually. Fintech blockchain easily solves that issue allowing instantaneous authentication and verification which helps to streamline processes and reduce paperwork.
The information about each transaction is visible and easy-to-track in case of a need for any verifications. Blockchain banking leaves no place to money laundering, scam, and other fake operations.
Blockchain-based, smart contracts perform some actions (like money transfer) after certain conditions are met. This significantly reduces the level of bureaucracy, ensures trust between partners, and accelerates processes as well as decreases the need for third-party intermediaries.
Blockchain in Finance: Use Cases
Now let us take a look at more specific cases of how blockchain can change the banking and finance industry.
KYC (Know Your Customer) is a procedure of identity verification performed by banks each time they get a new customer. Today it might take over a month as there is a need for getting reviews and approvals from third-party organizations and other banking institutions. Each year banks spend up to $ 160 million on KYC compliance.
The implementation of fintech blockchain is an effective solution that accelerates the verification process, eliminates mistakes and duplications, prevents from multiple interactions with a range of institutions as well as allows avoiding fraud and forgery. Once verified, the data will be securely stored within the system and easily provided to other banks (strictly in case of necessity).
Direct payments and lendings
At the same time, blockchain financial services allow peer-to-peer or company-to-company direct payments without banks and processing centers as intermediaries. The transactions get faster and cheaper, blockchain also ensures traceability and transparency — this brings the world to the concept of DeFi (Decentralized Finance). The idea of DeFi is that everyone across the globe can easily participate in a new financial ecosystem that allows peer-to-peer lendings and payments avoiding the necessity to use the services of banks, lending companies, and other institutions. So, along with the benefits, blockchain also has some risks for banks and may cause the need for changes in their processes.
Global trade finance
Being implemented into the financial system, blockchain can significantly improve and optimize global trade processes and supply chain management. With the help of smart contracts and blockchain-based IoT solutions, the companies involved in the international trading network can effectively regulate mutual financial liabilities, verify the quality of goods, trust each other more, make all the necessary payments — and all of these will require less time, money, and effort.
The Bottom Line
In this blog post, we have highlighted only a couple of examples of how blockchain is changing finance. The processes get simpler, faster, and more secure putting the industry into new conditions and bring up new opportunities as well as challenges.
SCAND is here to empower the industry players with robust and reliable software solutions. If you have an idea featuring the blockchain technology, contact us to make it a reality!