Blockchain in Banking
Blockchain Technology has paved the way to disrupt different business industries over the world. Blockchain technology in banking is a public ledger used in recording transactions rather than physical ledger or a single database. It is a powerful tool used in the banking and financial sector with a mean to deliver banking and financial services to the public.
The log contains metadata, which provides the bird’s eye view about each transaction. The ledger is attainable to the public via APIs and torrent sites. These data is cryptographically secured and it prevents tampering. Blockchain keeps the individual copies in sync.
Cost cutting during every transaction and reduced paperwork is an additional benefit and assurance provided by blockchain in the banking and financial sector. Blockchain in banking comes with many intuitive features pertaining to money transfers, record keeping, and other back-end functions. Blockchain in banking also facilitates with documentation tracking and validating of ownership with respect to assets digitally, creating an immutable ledger.
When it comes to banks and financial organizations, Blockchain can significantly tackle plenty of issues. Let’s look at them one by one.
Payments
Blockchain in banking enables bank with more quick and accurate payments process. It would permit banks with higher security along with fewer transaction fees. Thus, Blockchain in banking helps in eliminating, a considerable number of intermediaries in the payment processing system.
Fraud Reduction
Banks and financial industries are prone to financial crimes is no more a hot news. As you see, most of the centralized banking systems are prone to cyber attacks and other threats. Access to the banking database isn’t a difficult task anymore. This major concern can be ruled out with the implementation of banking in the blockchain, as it helps in significantly reducing the fraudulent activities of the financial world. The introduction of blockchain technology would help in getting rid of the latest crimes committed online.
The blockchain in the banking system is a real time saver, in the case of banks and similar financial institutions, they have to worry about the hike in costs which they have to bear to obey the AML and KYC norms, these processes are highly time-consuming too and have to be performed separately. Currently, banks upload the customers KYC data into a central registry, which is later used to access information of the same customer. When blockchain in a banking system is adapted, the verification of a client done by a bank will be accessible to other banks which erase the repetitive hassle. Another added advantage that comes in the way is that the client information is shared and will be available to all banks within a short span of time. This helps in cost-cutting and effortless management for the administrative section.
Smart Contracts
Blockchain in banking, facilitate with smart contracts. The smart contract designed, therefore, helps in storing every pertinent digital information including the computer code. The action gets executed here, only when two or more parties enter their keys. Contracts could be created and financial transactions get executed when the code is programmed, according to the set criteria.
Trade Finance
Trade finance is still mostly based on paper, such as bills of lading or letters of credit, being sent by fax or post around the world. Information can be shared on the blockchain network and the respective parties involved in the transaction gets access to the same information.
Clearing and Settlement
The messy web that records loans and securities costs investment banks billions of dollars to run. Today, this is managed through a myriad of messages and manual reconciliation.
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