Different ways blockchain technology can change the future of Banking

Blockchain technology is an open, immutable ledger that records transactions between two parties. It has the potential to make transactions quicker and more efficient by removing manual processes and the middlemen. While the use of Blockchain Technology in Banking is still in its infancy, it could play a positive role in various industries including banking. In this blog, we will explore the use cases and applications of blockchain in banking.

Meaning of Blockchain Technology

Blockchain technology is a network of peer-to-peer nodes that keeps transaction data, also known as blocks, of the public in various databases, also known as the "chain." This type of storage is usually referred to as a 'digital ledger.'

Every activity in this ledger is signed with the owner's digital signature, which verifies the transaction and protects it from tampering. As a result, the data in the digital ledger is extremely safe.

Applications of Blockchain Technology in Banking

1. Transactions between people

Person-to-person transactions are fairly prevalent, thus most individuals are familiar with them. They entail a person using their bank account details card to pay another individual. In different countries, there are a variety of person-to-person apps. Paytm is one such example in India. However, one drawback of these apps is that they have been only useful in a specific country or geographical region, and thus cannot be used to send money to persons in other countries. Because blockchain has no geographical boundaries, it can be used to solve this problem. As a result, cryptocurrencies can be used for cross-border transactions anywhere in the world. The only thing to remember is currency risk and the possibility of people losing money in the process.

2. Transferring Money Around the World

Traditional banks are confronted with difficulties relating to the global movement of money. It may take a few days for an international bank transfer to settle. Before it arrives at its destination, it must pass via a complicated web of middlemen, including custodian services and regulatory authorities like SWIFT. Each adds to the expense and time involved. Bank accounts must also be reconciled throughout the world financial system.

Banks may settle transactions transparently using blockchain. They also can keep track of them more efficiently than standard processes.

3. Verification of online identity

Without online verification and identification, it is impossible to execute any financial operations. This is true for all prospective service providers in the financial and banking industries that a user might have. However, Blockchain Applications for Banking has the potential to centralize the online persona verification process, allowing individuals to verify their identity once and then share it with whatever service provider they choose. Users can also select their preferred method of identity verification, such as authentication process, facial recognition, and so on.

4. Trading of Shares

Buying and selling shares or stocks in stock trading takes time since there are so many third parties involved, such as the stock exchange, individual brokers, and so on. However, blockchain has the potential to make share trading a significantly speedier procedure that can be performed instantly throughout the world instead of taking 3 days (which is normal in the traditional model). By eliminating all intermediate procedures and minimizing information duplication in the system, blockchain can help to speed up the stock market.

5. Crowdfunding

Many people utilize crowdfunding to grow their businesses as well as for other purposes. This entails soliciting funds from the general public via the internet, either through donations or through the trade of company stock. Initial Coin Offerings (ICOs) is a Cryptocurrency counterpart of a company's initial public offering and can be a helpful asset in crowdfunding. However, one drawback of Initial Coin Offerings is that they have been extremely hazardous due to the lack of suitable laws and regulations in place.

6. Credit Reports

Individuals and businesses must provide credit reports in order to approve a loan from a bank. There are other third-party credit agencies that can give these credit files to enterprises, but they are not available to people or small businesses. Furthermore, banks may take a long time to review these credit reports and approve or deny a loan. This procedure can be streamlined and accelerated using blockchain technology. Blockchain can also assist in ensuring that credit records are transparent, correct, and securely shareable with banks.

So, what does the future hold for Blockchain in the banking industry?

Blockchain for Banking Industry is not yet widespread but it is slowly getting there. There are many streamlining processes that financial institutions including banks need to keep in mind while adopting blockchain. For one, banks should have the required infrastructure for blockchain and ensure that each follows the worldwide standards for this technology. It is only possible to implement blockchain all over the world when this happens. And there are significant advantages once blockchain becomes a global standard. It will lead to more transparent banking systems, faster processing of transactions, and reduced processing costs. All in all, the future of blockchain in banking seems very bright indeed!