In this era of digital technology and cryptocurrency, the banking and financial industry is set to undergo a lot of changes. The banking and financial institutions are expected to rapidly evolve further with the help of new emerging technology trends such as artificial intelligence, machine learning, chatbots, and cloud technology. This technological innovation is unquestionably expected to revolutionize the banking and financial sector across the globe.
Earlier, you may have heard the term ‘Blockchain Technology’, which is associated with Bitcoin and other cryptocurrencies. Blockchain is a crucial part of cryptocurrencies. It is impossible for these currencies to even be operational without Blockchain. It is, therefore, not surprising that the financial services industry has embraced Blockchain to improve many of their outdated systems and, along the way, save a lot of money.
When it comes to payments and transactions between the users, blockchain technology does not depend on third party for approval. Therefore several banks are moving forward to updating their payments systems to blockchain technology which enables faster payments and lower cost, especially cross-border transactions.
Lower Cost of Financial Transactions
The use of blockchain technology in the banking sector lowers the cost of financial transactions. The longer the time required to complete a financial transaction results in high monetary cost. Fast-paced transactions and elimination of payment gateways will result in low financial transaction cost. Moreover, this eventually ends the third-party charges from all financial transactions in the banking industry. Thus it is benefitting the businesses as well as individuals who perform financial transactions every day.
Clearance and Settlement
In blockchain technology, the distributed ledgers keep updating constantly which solves a number of issues associated with the clearance and settlement systems. Through this system, tracking transactions and keeping them transparent is much easier.
Due to its improved security, the use of blockchain in the banking sector can help reduce fraud transactions. Blockchain allows only authorized users to access and view its public ledgers. Its distributed consensus-based architecture eliminates single points of failure and reduces the need for data intermediaries such as transfer agents, messaging system operators, and inefficient monopolistic utilities. Ethereum also enables the implementation of secure application code designed to be tamper-proof against fraud and malicious third parties— making it virtually impossible to hack or manipulate.
Borrowing loans from banks can be time-consuming as it can take a few days before it is processed to the borrower. Presently, many banks and financial institutions are using blockchain technology to speed up this process and make it more transparent at a lower rate of interest. By using the help of decentralized ledger, the compliance procedure can be fast-tracked. And if a customer block is created by one back, it is not necessary to repeat the procedure by other banks.
KYC Generally, banks spend a lot of amounts yearly to know your customer campaigns. Banks are hoping to reduce the cost they bear to abide by KYC norms. They tend to invest tremendous amount of time and effort in order to achieve this task. Eventually, it is obvious that the blockchain technology will make all the information to all the banks available in real-time. It also helps in bringing down the chances of frauds and crimes.