As banks need to make numerous transactions every day, Blockchain technology could be of enormous significance by bringing in security and genuineness in transactions. Endorsing an idea of trust economy, Blockchain can give financial institutions an opportunity to win the faith and confidence of their customers. Not to ignore are the potential savings that it could bring in terms of cost and labor for the banking sector. There’s no doubt why banks and major financial institutions are investing in resources to research how to implement the technology for best practices. Blockchain is a technological advancement that will transform the financial services provided by banks.
The global financial system serves billions of individuals and businesses, bringing in trillions of dollars in circulation every day. Although maintaining a digital façade, they are still heavily reliant on paper. With such a system, there are many issues that shoots up the expenses, causes lags, and operates amidst the fear of security breaches. However, bringing Blockchain Technology in banking will transform the way the industry operates.
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Here are a few ways trade analysts believe that the technology can transform finance and banking:
Eliminating the need for a lot of intermediaries in the payment processing system, Blockchain would bring down the expenses involved in processing payment between businesses, their clients and even between banks themselves. Above all, security while payment distribution is something that matters the most.
What is gaining attention towards the Blockchain Technology is its potential to reduce fraud in the financial arena. Banking sector faces economic crime almost every year due to a centralized database that is extremely vulnerable to cyber-attacks. Blockchain being a chain of distributed blocks, each holding batches of individual transactions, and arranged in chronological order, would help eliminate some of the crimes against the financial institutions.
Undoubtedly, blockchain based technology would help reduce the risk of operational errors and fraud that can affect trading.
Potentially beneficial, but blockchain in banking sector would need to handle an extraordinarily huge data set, therefore scalability must be there. Also, it would need to comply with the privacy laws of today as well as the future. Still a long way to go before ensuring its practical implementation in the financial world.
Also read: Bank and Blockchain- A perfect Match