ADN: 5 Ways Blockchain will Transform the Financial Sector
Blockchain is one of the best technologies to be infused with the finance industry. In this ADN Coin blog, we discuss how this has become so.
Although blockchain has long been existent, it had only risen into awareness when Satoshi Nakamoto used it to develop the leading crypto of all-time — Bitcoin. Initially, financial institutions opposed the technology as they saw it as an immediate competitor and a disruption to the stabilized banking system. Though there are several roadblocks along the way, blockchain proves its great potential as it found its way to progress within the financial and banking industry.
According to a statement from the Harvard Business Review, “blockchain will do to banks what the internet did to media.” ADN stands by this statement and believes that blockchain’s instilled characteristics are essential to the needs of the current financial industry. Parallel to this, ADN is currently developing its own mainnet that will create an investor-friendly blockchain ecosystem. Through ADN’s own blockchain, ICO projects can successfully progress leading to secured investments for ICO participants.
At present, more banks start exploring the advantages of integrating blockchain into their payment systems. About 200 financial institutes have implemented, or are in the process of integrating blockchain technology within their operations. Prominent banks such as Deloitte, HSBC, Citi, Standard Chartered, and Bank of China are included in this growing list. However, JP Morgan & Chase surpasses others in the blockchain adoption race as it has not only placed its faith in the future of blockchain but also in the cryptocurrency market. It will be releasing its own stable coin (JPM) and has recently established Quorum, a distributed ledger and smart contract platform opted to promote speedy transactions and solve addressing challenges for the finance industry, banks, and beyond.
The future is indeed bright as gold toward the emergence of blockchain technology in the financial industry. In a nutshell, here are the 5 ways on how blockchain can improve our current financial sector.
1. Transaction Speed and Accessibility
As a standard, payment transactions rely on a central processing authority or simply a middleman which requires longer processing time. Meanwhile, blockchain offers a transparent and seamless way for two parties to pay each other without depending on central infrastructure. This enables customers to securely send money and receive it immediately, without any system prolonging the transaction process.
Imagine how convenient would it be to conduct transactions within the digital realm. People can easily deposit money via digital wallets, pay bills through a mobile or desktop application, and swiftly receive salaries — removing the central processing middlemen and time-consuming redirection of swift codes and International Bank Account Number (IBANs). Beyond that, cross-border payment transactions will be done in real-time — it’s a futuristic paradise.
2. Identity Authentication
Client verification is a significant process within the financial sector. Currently, banks invest too much time and labor in gathering a single client’s background. The assigned bank personnel typically verify if the customer is currently employed, gathers all the necessary documents needed, and checks the previous credit history of a client. All-in-all, the process is time-consuming and tedious, especially for major banks and entities that need to attend to hundreds of applications per day.
However, through blockchain’s Know-Your-Customer (KYC) verification approach, banks and other financial organizations will be able to rely on a more secure, organized, and unified model of data handling which will save time and costs spent on identity authentication. The client’s information will be stored and protected through the blockchain network. A bank, for example, can simply send a request to access a customer’s data in the blockchain platform through OTP codes. After having been granted access to the platform, all the customer’s data are then made available for that specific bank only. Data cannot be altered or detracted on the blockchain without valid consensus.
3. Elimination of Fraud and Transparency
Fraudulent activities are common within the financial sector and other sectors wherein operations are based on money matters. With the primary purpose of facilitating secured transactions and promoting transparency, blockchain is considered as a non-corruptible and fail-proof system. By implementing a decentralized digital ledger system that will allocate all information in one place, concerned parties who have access to the blockchain can achieve complete transparency; meaning, any fraudulent activities or data breaches will immediately be noticeable and tracked.
Each transaction within the blockchain is stored in the form of blocks that have a cryptographic mechanism which is immutable and extremely hard to corrupt. With a secure platform in place, it is now possible to eliminate the cybercrimes and attacks transpiring in the banking and financial industries.
4. Create Immutable Database Records
Financial records and documents stored on internal databases may still be dependent on third-party applications. Even though financial institutions pay a huge amount of money for software subscriptions that will protect legal documents, those are still prone to turpitude involving human interference, forgery, and tampering.
Blockchain’s irreversible recordkeeping system serves as a great database algorithm that will record all financial transactions. It will minimize wrong information and missing records as the technology allows the recording, storing, and transferring of data across a unified platform. Moreover, blockchain can be used for business and legal documents such as smart contracts, mortgage records, background records, and property documents. Blockchain technology will enable all organizations to validate records seamlessly without further hassles and delay.
5. Rule Implementation through Smart Contracts
Banks have their own internal rules that customers should abide by. These are drafted by members of the management and lawyers which are then implemented to the clients. We are all aware of cases caused by human errors and political manipulation done for personal gain. The integration of smart contracts in blockchain technology will add a layer of automation of contracts, ensuring a non-biased, secure, and transparent rule within the system.
Serving as a digital ledger technology, blockchain proves its eligibility to solidify rules through smart contracts which can replace traditional contracts in terms of defining the rules of an agreement. With blockchain in place, obligations cannot be avoided as they are automatically and securely enforced by the system.
ADN strengthens its stand toward the adoption of blockchain technology to instill decentralization, immutability, and transparency in the financial sector. ADN is hopeful to witness this revolution as blockchain integration is the key solution to the financial sector’s vulnerabilities such as low transparency and limited traceability.
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