Blockchain is a new technology that is impacting so many other markets. These days effect of blockchain technology on the banking sector is one of the hot topics. To know the details first, we have to understand what is the blockchain and what is the main objective of blockchain.
What is the blockchain?
Blockchain is something that we can relate to the chain of blocks that exist digitally. It is a decentralized system that keeps records of all types of transactions made between two or more parties in scripted language with the help of cryptography. The process behind this is the combination of people’s or distributors’ databases and some technology known as cryptography. Every transaction made in the blockchain is recorded with the combination of both of them. The data is stored in the form of records usually called records with identical information of the distributor and the cryptography. When a decentralized ledger is readily filled with transactions done between two parties is named as their blockchain.
Two parties can have one blockchain and one party can have more than one blockchain. It is a type of digital ledger made with cryptography to keep the transactions secure.
How blockchain and banking are linked with each other?
To describe the link between the blockchain and banking I would like to give the example of the internet and media. Technology is impacting banking so much in the case of data processing systems and payment functions. It has also proved effective in fraud detection and reduction.
These days, if we talk about money transfers, which are essentially used by people, it is a sort of time-consuming process. And if you are transferring money with the help of a third party then you have to pay some fee to them as well. However, blockchain works to reduce the number of these third-party platforms to save time and money for the users. In so many cases transferring money also became a medium of fraud for thefts and hackers but with the increased security provided by the blockchain, this risk is also reduced by a huge percentage. This also helps to reduce processing costs and e-commerce transactions. But if we talk about the back office of banks, it eliminated the traditional roles of the banking officials.
Also Read: Blockchain and Storage Bridging the Gap
Blockchain also won the trust of businessmen and e-commerce parties in terms of money transfers because of its security and shared records between two parties. Also, it increases the swiftness of money and keeps real-time transactions for the flow of cash and capital.
According to some experts with the introduction of blockchain, the existence of physical money and cash will come to an end. It is also challenging the banks in terms of controlling the monetary policies, and maybe it is the star of the end of traditional banking. If people and business proprietors get a better system that is even more secure then why would they rely on third-party money-transferring systems like banks.
The rise of blockchain is considered the rise of non-banking as well as untraditional financial organizations with the ability to decrease the additional costs of the customer.
What are the major features that made blockchain better for banking?
So many banking organizations are adopting blockchain to provide their customers with better services with the factors of money transfer, transaction security, and digital keeping features. It’s high time to know why banks need to adopt this technology and how this is different from traditional banking.
So many banking organizations are equipped with blockchain development to provide their customers with better services with the factors of money transfer, transaction security, and digital keeping features. It’s high time to know why banks need to adopt this technology and how this is different from traditional banking.
Fraud Reduction
Blockchain is considered the safest technology for money transferring and according to some facts with the boom of this technology fraud in the world’s transaction system reduced up to 40%. With the help of blockchain hacking attacks on the banking system reduce a lot. This happens because blockchain cryptography is used to keep a record of the transactions made between two parties.
KYC
KYC is the abbreviated name of Know Your Customer. According to a survey, financial institutions spend so much money in KYC to get the details of their customers. KYC is helpful in reducing the cases of money laundering and terrorist activities. Now in so many countries in the world, it is very important to approve KYC even to buy a SIM card. Blockchain is responsible for providing an organization full access to verify the details of the customers through other organizations, which can also be described as repetitive KYC.
Smart Agreements
Blockchain is committed to recording all types of transactions digitally, even the IP of the computer system used to make a transaction. According to the criteria, a transaction is only taking place when the system detects the IP address of the computer which is a smart move.
Payments
Blockchain is highly used in the cases of money transfers or we can say payments. It allows the banks and customers higher quality with reduced cost to process transactions between two parties which can be the bank and the customers as well. Blockchain says goodbye to all other payment processing systems.
Trade finance
This is known as the most helpful application of technology. You can make complex transactions through these features between one or more parties. Whenever specified conditions are met then this feature is all ready to show the details of transactions made between the parties automatically. This is a type of onboard network to share information between all the concerned people.
Conclusion
I guess the blog has enough information to do justice to the topic and provide you with the right information. As we all see blockchain technology is used in banking much better but on the other hand there are so many other financial institutions that don’t want to adopt blockchain yet. But with the introduction of technology, we see so many changes in the case of money transfer, investment, and other mediums of banking. The above benefits of blockchain are not to push traditional banks down but yes if the world is moving to digital then whyn’t banks go digital?
