The Impact of Blockchain Technology in the Banking industry
Blockchain technology is bound to make a positive difference in industries that rely on the security and safety of assets. Banks stands out the most in this list, since they belong to the oldest as well as the most important industry in the world.
Even though, banks nowadays have shifted most of their features online, users still have to access the official website or perform other operations in a number of tiring steps.
So, why is it bad?
Although the way these services are accessed has been adapted to new technologies such as mobile applications, the processes remained the same. The timespans needed to complete transactions are still long and banks tend not to update their systems, which does not allow several features that could ease clients’ processes and ends up frustrating end users.
There are many issues that blockchain technology can fix in the current banking system, but we will cover the 4 most important problems:
1. Scams & Frauds
According to a report by PwC, 45% of financial services are a victim of ‘economic crime’ in a single year, while the rest of the industries account for 34%. This is an alarmingly high number considering banks have multiple security and identification checks. However, these systems are centralized, which means that if a single entity controls the entire bank, then filters and procedures can be either bypassed or attacked by criminals. The only way to solve this problem is to adopt blockchain technology in the banking industry. Decentralizing the entire process distributes the same data to every computer/node in the world. The data is also irreversible due to the proof-of-work employed in the technology.
2. Payment Methods
Using blockchain technology in banks doesn’t mean adopting cryptocurrencies. It points to the possibility of creating a custom virtual currency that can be regulated by governments to be used worldwide. Paying through digital currencies is preferred by crypto users because it’s fast, secure, transparent and excludes extraneous fees. On the other hand, debit/credit cards and cash can be stolen and used by someone else.
3. Trade Finance
In order to understand the importance of using blockchain technology in trade finance, take a look at the definition:
“Trade finance represents monetary activities related to commerce and international trade. Trade finance includes lending, the issuance of letters of credit, factoring, export credit and insurance.”
The entire process is based on paperwork — following traditional methods for exporting and importing goods and services takes up time that can otherwise be utilized. According to R3’s managing director Charley Cooper, “Trade finance is an obvious area for blockchain technology.”
While resources do need time to ship from one country to another, the movement can be accelerated by using smart contracts to digitalize the transactions and documentation.
4. Identity Verification
Blockchain platforms can serve as a verification system for the identity of bank users. With a unique digital code, people could stay anonymous while performing legal transactions. Instead of going through the hassle of filling bank records and accounts, they can be digitally updated using blockchain technology. Besides, automated technology is far more accurate and error free.
A solitary solution for all these problems is already present in the crypto world in the form of Cryptobanks.
Interested in learning more about CryptoBanks? Stay tuned to these articles or subscribe to our emailing list.
