How Can The Banking Sector Leverage Blockchain Technology?
There isn’t a single day that passes by without a new announcement about how banks are finding ways to incorporate blockchain systems into their daily functioning. Banks preferably have a notable interest in utilizing Blockchain Technology because it is a great source to avoid fraudulent transactions. Blockchain is considered hassle free, because of the extra level of security it offers. It combines shared databases and cryptography allowing multiple parties to have access to a universal digital ledger that cannot be altered. So its a secured chain with blocks of data that cannot be undone or changed.
Today fraud protection is a big deal, so let’s check out what type of digital solutions are banks considering to curb this:
Traditionally to buy bitcoins you need to set up an online wallet, verify your details and make a deposit in return for some coin. However, there have been new bitcoin ATMs and cashpoints been introduced that let you physically purchase coins then and there, the verification process is carried out on the phone. The most natural progression is for a bank to leverage this, making it a part of their services. Since the average brokerage for purchasing cryptocurrencies ranges from 10-15 %, banks can have a good profit margin. So banks can either stay away from cryptocurrency or take up the bandwagon.
Utility Settlement Coins (USC):
The product USC will soon be a part of the digital cashsystem created via blockchain technology. No third-party verification and a universal ledger visible to everyone will enable quicker payments between bank accounts than ever. The good news is six banks have joined the USB-led effort to develop a USC and it will most likely be launched by the end of 2018.
When a syndicated loan is borrowed by a company it usually takes long for the entire process to happen. Much of the communication about loans is yet done by fax. Now putting up syndicated loans on blockchain systems will make it convenient. The key challenge is, finding a way for separate blockchains to talk to each other so that changes to a loan's ownership can be easily reflected across all systems.
Clearing and Settlement:
The web that is used to record loans and securities costs financial institutions and banks huge sums to run. This again is a place where blockchain technology can come in. Banks could save up by using blockchain technology to improve the efficiency of clearing and settlement.
Even today, trade finance is still mostly based on paper, such as bills of lading or letters of credit, all of this being sent by fax or posts all over the world. Many bankers seem to be crying out for modernization. Several of them believe that blockchain is the obvious solution especially as numerous parties need access to the same information. And if there is a lot of people who need access to the data, Blockchian is the one technology that can spread the information legitimately within seconds.
Verification plays a vital role in banking, be it of the customers or the counterpart. Without verification, there is a lot of threat and lenders would quickly lose their position of being the guardians of people’s money. If banks aren’t responsible enough regulators can charge them a penalty to do so. From years, banks have been looking for digital solutions to record customers identities and keep them updated. Its been extremely challenging and banks aren’t being able to find the right formula. Blockchain has the ability to share a constantly updated record to many parties, now this cryptographic protection can be a great solution.
The Blockchain technology offers several chances to reshape and enhance the banking industry. Its upto these financial institutions now whether they pick a digital transformation consultant or not.0 Likes