Blockchain technology holds immense potential to bring a profound positive change across all industries. It enables users to benefit from its decentralized and transparent network. Various industries across the globe are embracing blockchain technology for more efficient, cost-effective, and secure operations – one of these industries is the finance industry.
to the Harvard Business Review, “Blockchain will do to banks what
the internet did to media.” Additionally, Global Fintech Report
states that 77% of the fintech industries are expected to adopt
blockchain technology as their integral system by the end of 2020.
of blockchain in banking
us explore the top 4 applications of blockchain in the banking
is generally believed that the involvement of money results in
increased chances of fraudulent activities. Given that the overall
banking sector only revolves around money, security is paramount for
the industry. More than 40% of the financial institutions, such as
stock exchanges and money transfer service providers are vulnerable
to loss due to fraud. One of the reasons is centralized database
systems for banking operations and fund management. Due to its single
point of failure, systems can be decrypted by hackers very easily.
adds security and trust in the mechanism. The transactions are stored
in the form of blocks that are encrypted cryptographically and are
difficult to decode. If someone tries to breach the block, then he
has to change the hash of all the previous blocks, which is
impossible to achieve.
Your Customer (KYC)
Banks bear a huge cost for complying with KYC (Know Your Customer) and AML (Anti-money Laundering) verification. According to a survey conducted by Thomson Reuters, yearly expenditure on KYC and AML verification ranges between $60 million and $500 million. Currently, banks follow a centralized approach for KYC and AML processes, where each bank uploads its own KYC data for each client.
with the adoption of blockchain technology, the KYC process would be
simplified. The verification process of each client done once would
not be required to be done again by other institutions.
contracts are self-executing contracts that contain an agreement
between two parties. Smart contracts in the banking sector proved to
be an important step as they completely distribute and decentralize
the network. This helps accelerate transactions and further
simplifies the complex processes. As transactions are approved only
after the conditions are met, it reduces the chances of error in the
integration of blockchain in trade finance indicates simplifying
complex transactions. Exporters, importers, banks, and other parties
share a common distributed platform that executes a trade when
specific conditions are met. All the concerned parties are able to
view the transactions and keep themselves aligned with the regular
to Coindesk, Barclays in collaboration with Israel-based start-up
successfully executed blockchain trade finance transactions.
Conventionally, it used to take 7 to 10 days for completing the
transaction but the integration of blockchain reduced the time to
just 4 hours. It also dramatically reduced the cost related to
licensing and other indirect overheads.
banking industry is recognizing the potential of blockchain
technology and is investing in blockchain-based solutions. The
popularity and increased benefits are prompting start-ups, medium and
large organizations to adapt to the changing environment.
If you need any assistance regarding how to integrate enterprise blockchain solutions into your finance system or any other, then our experts can help you out.
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