Blockchain technology can revolutionize different industries, the features of decentralization and transparency are appealing for business sectors all over the world. Despite the fact Financial Services face strict rules and regulations, increasingly financial institutions are realizing the potential of blockchain technology. As the major players in these industries conduct tests to discover innovative use cases and opportunities, we are already witnessing more blockchain-based solutions for transparent, accessible, and reliable financial transactions.Read more: Blockchain to Revolutionize Banking Industry
Blockchain technology is a decentralized, distributed, and public ledger that is used to record transactions across a network. Because of its design and properties, blockchain is secure, transparent, and impossible to alter.
The benefits of blockchain come from the following properties:
Distribution: Each time a new transaction and block are added, everyone within the network receives a copy. No single entity controls the ledger, but the system is designed to provide everyone with the same information.
Immutability: A blockchain provides an accurate, chronological history of transactions. Because each person within the network has a copy, it is nearly impossible to alter or erase transactions or to add information that has not been verified.
These features have many obvious benefits for the banking and finance industries. Here are some ways businesses are harnessing the power of blockchain:
At its most basic, a blockchain is a shared and secure digital ledger that allows each component, or block, within a transaction to be tracked and approved by everyone who is party to the transaction. Every person within the network receives a copy of the transactions as well. Because of these features, blockchain technology is resistant to distributed denial-of-service attacks, hackers, and other types of fraud.
Supporters say it creates an irrefutable digital paper trail that is more transparent and cuts out room for manipulation. This could facilitate more secure transactional records for the transfer of almost any kind of asset, from cash and shares to property and insurance contracts.
Blockchain’s low costs provides an opportunity for smaller players to compete with major banks, promoting financial inclusion. Many people are looking for an alternative to traditional banks because of constraints like balance requirements, low access, and banking fees. Blockchain can provide an alternative that uses digital identification and mobile devices, free from the hassle of traditional banking.
Unlike data lakes or data warehouses blockchains excel at verification and record keeping. For businesses that need accountability in their data, this is vital. With a blockchain ledger, data cannot be edited or altered unknowingly. Even if new data supersedes the original, such additions will be shown in the chain. This can prove vital, for financial data and any other forms of record keeping.
Know Your Customer
Financial institutions across the world are responsible for complying and reporting on several requirements from their regulators. Know Your Customer (KYC) is a key requirement here, but the process can be incredibly time consuming and lack the automated customer identification technology and integration needed by teams to efficiently conduct their work.
Blockchain technology could provide a digital sole source of ID information allowing for the seamless exchange of documents between banks and external agencies. This would result in automated account opening, reduced resource and cost, all whilst maintaining the privacy of data that is legally required.
The global payments sector is massive, yet slow, costly, error prone and not completely traceable, resulting in increased fraud. It is desperately in need of a shake-up and blockchain is already providing solutions in this space. Companies like Ripple and Request Network are leveraging the technology to disrupt the payments industry.
As blockchain’s potential is growing by the day, it is quickly challenging the status quo of financial institutions and intermediaries of the financial services industry.
It has become a necessity to stay informed of the most recent developments in the field to stay ahead of the competition, reach out to Brockton Point if you need support.