Since its invention in 2008, blockchain technology has depicted, in numerous ways, the positive impact it can have on different sectors.
The finance and banking sectors have particularly married well with this technology and still continue to show signs of disrupting the respective traditional industries.
What makes blockchain a super attractive platform is its highly decentralized, immutable and transparent framework. And there are multiple areas where the technology can be applied, in the banking and financial markets.
Let’s explore how blockchain is set to revolutionize these ever vibrant sectors of the economy.
Blockchain In The Banking Industry
Looking at the mega problems facing banks and financial institutions today, blockchain has the technological framework that will end one and for all, the inefficiencies and inconveniences that often come along. Its high-level safety and security when it comes to exchange of data, information and money, no doubt makes the one and only top choice to go for.
How Blockchain Is Set To Transform Banking
Banks and other financial institutions are mainly charged with the responsibility of keeping money safe and secure for people. And there are usually many processes and lots of people involved in that. From experience, where too many people and manual processes are involved, there are bound to be multiple cases of errors and frauds. That causes inefficiencies which are often costly.
The adoption of blockchain in banking systems can:
- Make trading processes more efficient and reliable
- Improve regulatory control
- Eliminate unnecessary intermediaries
- Reduce banks’ IT significantly translating to reduced costs
- Displace almost all the trusted third-party functions attached to financial institutions
How Sustainable Is Blockchain Technology in Banking
Blockchain infrastructure is immutable, transparent and hack-proof. And that’s what has made it sustainable for the last one decade. According to Cryptotraderpros, the current market capitalization of cryptocurrency stands at $550 billion while that of the global banking industry is at $134 trillion.
Many cryptocurrencies have come up, and still continue to, and are all successfully riding on the blockchain technology. Now, comparing the figures above and considering blockchain has been around for barely a decade, it holds true that the technology is going to take the banking industry by storm and it might also be here to stay.
Blockchain in the Financial Markets
The financial market is huge and involves numerous and sometimes bureaucratic processes that often tend to be costly and time consuming. But the blockchain technology can turn tables than what most people would expect.
Here is how blockchain can change things in the financial markets:
- Fraud Reduction. Wherever money is involved, fraud always finds a way of creeping in. And money transfer service providers, stock exchange platforms and banks are often the victims. But considering blockchain’s incorruptible technology operating under distributed ledgers, hacking and cases of fraud will be eliminated completely.
- Smart Contracts. A smart contract is a self-executing piece of code, which only runs when certain conditions on it are met. If this blockchain framework is adopted in financial transactions, it can help increase speed up things and simplify complex processes. The technology is set in manner that a transaction can only be approved when accurate information corresponding to the written code and certain conditions are met. That means there can never be room for error or manipulation.
- Trade Finance. Trade finance is one of the fields set to benefit intimately from the blockchain technology. Through the blockchain network, all parties involved in trade such as exporters, importers and banks can be able to share real-time information on a common distributed ledger.
There are literally no lengthy processes involved. Ideally, once certain specific conditions of a deal have been met, smart contracts on the blockchain will automatically execute themselves and all the actions will be laid bare for the respective parties to see. So, a process that would ordinarily take 10 or so days would be executed in a mere 3 or so hours.
Based on blockchain’s solid infrastructure and timeless potential, more and more financial institutions and markets have started adopting it. With numerous researches and tests, this technology has the power to transform the way people do businesses in the financial and banking sectors by guaranteeing TOTAL safety, security and transparency.