How Blockchain Is Changing Banking and Financial Services

2local is tapping into banking with native L2L tokens, which are designed to rise in value as part of a cashback system. The goal is to achieve a sustainable world with prosperity for all. But how exactly is the banking industry being transformed by blockchain technology?

Nowadays, thanks to blockchain technology, life becomes easier. Sure, it enables fast and convenient transactions, but it also has more opportunities than just supporting Bitcoin. Blockchain has the possibility to conduct payments, and there are even more regular banking operations based on blockchain in the near future.

What is Blockchain?

Blockchain technology contributes to the credibility between bidders. If you know about Bitcoin, blockchain is the main technology that helps to make sure that transactions are secure and accomplished successfully. However, banking as well as other industries are using blockchain in very different ways.

In other words, a blockchain is a secure “accounting ledger” or list of transactions. This technology has two main features:

Distributed

There are a large number of account book copies. An open blockchain, for example Bitcoin’s blockchain, is published and replicated in numerous locations. New transactions are then simulcast to a wide chain of participants, who add those transactions to the account book. No one manages the account book, however the system is created in such a way that each account book includes the same information.

Immutable

One of the key elements is that a blockchain has to keep a precise transaction history. As there are numerous replications of the account book, it is difficult to alter or erase transactions. For that, you would need to modify each copy of the account book in each place. To do that, one would need to hack millions of devices at the same time — which is obviously impossible.

Money Transfers

Blockchain is already used by banks for remittances, as consumers have always had negative experiences when sending money abroad. Such transfers are considered expensive and cumbersome, which is why the bank money transfers system needs improvement.

The solution of moving money was offered by Bitcoin. However, mainstream banks and service providers still keep looking for ways of improving remittances and reducing the exposure to cryptocurrency by using blockchain technology. For instance, some leading banks have collaborated with Ripple to facilitate international payments through blockchain technology, and others are also working on similar solutions.

Blockchain-based transfers are beneficial not only for banks but also for customers. Both the time and money of customers and banks are saved with blockchain technology, as electronic transfers can be easily made with mobile phones at a far cheaper price.

Inexpensive Direct Payments

The process of receiving a payment is not easy. It goes through many intermediaries before it is completed and each of them is willing to take their own fee for the part they play in your funds moving.

There is a list of ways to benefit from blockchain technology:

Swipe fees

There’s a processing fee when customers pay with plastic cards. That means that merchant’s profits are decreased by the banks’ fees. The solution for some merchants is to switch to less-expensive blockchain payment methods.

Insufficient funds

Serious losses and fees may fall upon a merchant’s lap when a customer’s check bounces. With blockchain technology, merchants can be sure that the payment will be received in no time (a few minutes or less).

Blockchain-based transactions are fast and irrevocable, so individuals may feel confident in receiving payments. They also enjoy using such an opportunity because these transfers are cheaper and easier than banks’ cross-border payment offers. When there’s a need to sell a high-priced product, such as a car, it is important for the seller to get paid before providing the keys to a buyer. It is believed that cash, wire transfers, and cashier’s checks are the safest ways to receive payments. But actually, these options are dangerous, labor-intensive, and can be faked.

Transaction Details

Blockchain technology is perfect not only for transferring money but also for controlling transactions. There are several areas where it can be used by banks.

Title details

With ledgers being difficult to intervene in, ownership can be tracked efficiently and easily. The ledger keeps each transfer of ownership which turns into a reliable information generator about any type of possessions.

Smart Contracts

Actions which made transfers more expensive, complex, and protracted can be automated with the help of computer protocol contracts. Smart contracts can track the time of making a payment, the delivery time when the deal is ended, and control any issues that may appear. Being programmed correctly, encrypted smart contracts don’t make mistakes and they never get tired. They can be considered as escrow providers between a buyer and seller that acts as an indifferent third-party.

Financial Inclusion

Blockchain and other technologies have the possibility of driving financial inclusion; they can keep prices low and let startups compete against large banks. For people who prefer to avoid banks, blockchain will help. First of all, it doesn’t have any fees, nor does it require a minimum balance. And one more advantage — they just need their smartphone. In cases when it’s usually difficult to identify a person, digital IDs can provide a large-scale solution.

Reduced Fraud

Blockchain technology confronts hacking, DDOS attacks, and various kinds of scams. What’s more, with the help of a blockchain-enabled digital ID, it allows banks to identify people much faster and impeccably. Since there are less scams out there, the price of doing business is reduced, which is beneficial to everyone.

What We Don’t Know

Despite the fact that banks and various industries already use blockchain, this technology is still kind of new. Blockchain is still not regulated properly, which is why it is difficult to predict what to expect in the areas such as protection, privacy, potential risks, and dispute resolution. Before using blockchain-based transactions, it is recommended to research what issues may appear.

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