Decentralization for a better tomorrow
Over centuries, we have witnessed the gradual rooting of centralization in organizations, governments and economy as a whole. It was a comfortable development that came into existence as naturally as human beings and civilizations, but, it was not the best.
Especially the 21st century, which has seen multiple instances which prove the failure of centralization in providing secure, fair, immutable, quick and transparent operations in all sectors. Decentralization is the need of the hour due to its immense potential of leading the world towards a fairer and equitable civilization. The question that is hovering over our heads is, how can we bring decentralization in societies and how will we be benefitted by its widespread establishment?
Blockchain technology lies at the heart of decentralization because it’s an immutable, transparent, hack-proof and distributed ledger that stores data in multiple nodes. No single entity is responsible for storage of all the data and it can be accessed from multiple locations. Data that goes into a Blockchain ledger after validation stays there forever without being vulnerable to tampering. This ensures that the data is secure, transparent and authentic.
Introduction of Blockchain technology in banking can change the face of financial sector. Although its implementation may appear unfeasible in the beginning, it reduces costs and time in the long run which are incurred as a result of verifying mutable data and administration in the current system of data organization and management. The technology replaces expensive and error-prone intermediaries in the banking sector by automating processes through smart contracts.
Smart contracts along with Blockchain technology makes the entire system conflict-free. It enables transparent and assured exchange of money, property, shares or anything that carries value. Implication of this technology in financial institutions will reduce the time and costs exhausted by manual labor that is employed for smooth processing of data.
Santander Bank’s innovation fund has published a report that states that implementation of Blockchain Technology can potentially reduce the infrastructure costs of financial sector by $15-$20 billion by the year 2020. This can be achieved by various ways, one of them is by employing the technology for KYC processes. Smart contracts can replace the manual labor that goes into administration of identity verification process.
The persistent methodologies involve carrying out of separate KYC processes individually by banks. With the installation of Blockchain in banking sector, one bank can carry out KYC for a customer and upload the information on a common Blockchain network accessible by all banks. The information can be extracted by all banks once a customer generates the trigger, decreasing the processing costs by multiple folds.
Smart contracts automate processes like release of insurance payments when verifiable claims are made by the customer. This will also require the inclusion of authorized third parties into a single system like hospitals, garages, etc. with insurer and the insured to enhance process efficiency.
Implementation of Blockchain technology in financial sector across the globe will build a seamless world economy. It can eliminate the problems of money laundering, financial scams, untraceable cash flow, unsecure data and forging of financial documents. It serves as a solution that is capable of building financial peace while bringing all the financial institutions on one global platform.