A permanent record of all transactions between two parties is kept on an open ledger called a blockchain or DLT (distributed ledger technology). A blockchain is made up of numerous separate blocks connected to one another in a particular order. Without the use of middlemen or intermediaries, all parties can share the online ledger via a computer network. Faster transaction processing results from this. One of the many advantages blockchain technology company has for the banking sector is faster transactions.
How Banking Can be Improved with Blockchain Technology?
The overall advantages of blockchain technology make it obvious that the banking sector should be the first to fully adopt the technology. Almost every aspect of the banking sector can be enhanced by blockchain to increase its security and transparency.
Blockchain technology has global implications and can streamline and streamline trade by doing away with processes that rely on documentation. Given that it is not owned by any one person and that all parties involved can access the data, a public blockchain can be very useful. Blockchain technology was once only known to be used in relation to digital currencies like Bitcoin or Ethereum. That has changed now that blockchain technology can improve many aspects of banking.
USE CASES OF BLOCKCHAIN TECHNOLOGY IN BANKING
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Faster Payments
Currently, it is very difficult to send money from one bank to another or from one country to another. Banks can make use of cutting-edge technologies to enable quicker payments by establishing a decentralized channel (cryptocurrencies). Depending on the institution and the country you are sending money to, wire transfers today can cost between $25 and $50. Blockchain technology has the potential to speed up payment processing while also lowering costs.
Banks will be able to minimize the demand for third-party verification by implementing blockchain. 90% of members of the European Payments Council in 2016 thought blockchain technology could revolutionize the banking sector within the next ten years.
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Clearance and Settlement Systems
Banks can use blockchain to settle transactions directly and track them more effectively than existing protocols like SWIFT.
Even the biggest banks in the world encounter numerous difficulties when moving money. Even something as straightforward as a bank transfer must pass through numerous middlemen and adhere to compliance requirements before it can be delivered.
Only payment orders are processed using the centralized “SWIFT” method of payment processing. A number of middlemen are used to transfer the funds. These transactions are all expensive and time-consuming. Banks may be able to track all global transactions thanks to blockchain technology. To process and settle transactions instantly, banks can do without intermediaries and regulatory bodies.
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Buying and Selling Assets
Blockchain technology reduces the asset exchange fee by getting rid of middlemen and the transfer of asset rights. Studies and reports claim that using blockchain to move securities can reduce global trade process costs by more than $20 million annually.
Buying and selling digital assets like stocks is difficult because it involves a lot of tracking which entity owns what. Asset sales and purchases in the past involved a convoluted network of exchanges and middlemen. These transactions were all based on paper records.
It is difficult to accomplish the same task electronically, so most of the time, buyers and sellers must rely on a third party to manage their paperwork. By preserving decentralized data of digital assets, blockchain technology has the potential to transform the financial sector.
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Blockchain for Accounting and Auditing
Accounting is one area of online banking that has advanced toward digitization more slowly than any other. A number of regulatory requirements involving data validity and integrity must be met in order to digitise the accounting process. The accounting and auditing industry may undergo significant changes as a result of the adoption of blockchain technology.
Blockchain technology, according to experts in the field, has the potential to streamline compliance procedures and improve bookkeeping processes. Businesses can add the data to a joint book rather than keeping separate records of transaction receipts. Every entry will be decentralized and open to all parties involved.
As a result, the records will be safer and more accessible. Blockchain technology will serve as the virtual notary who authenticates every transaction.
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Digital Identity Verification
For customer ID verification, the majority of businesses, banks, and financial institutions still use antiquated, manual document verification processes based on paper. Customers are forced to switch to another company by a slow, difficult process. Customers and businesses will benefit from a quicker, more secure, and more effective customer verification process thanks to blockchain integration. The use of customer data for customer verification in other services by other organizations will be made possible by blockchain technology.
Future of Blockchain In Banking
Blockchain experts predict that certain banking standards will improve, but only under certain circumstances. Banks must develop infrastructure that can run a global network in order to fully utilize blockchain. Blockchain technology alone can bring about significant changes in the banking sector.
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