Benefits Of Integrating Blockchain Technology In Banking Industry

The banking industry is undergoing a sea of change by embracing advanced banking methodologies with each passing day to deliver greater transparency and accuracy in various operations of the industry. The financial services industry is moving beyond its legacy systems and embracing new technologies to improve their outdated systems and infuse innovative ways of carrying out diverse activities.

The financial companies are enthusiastic about using technologies such as business intelligence and blockchain in order to make their process effective by solving a lot of problems of this sector. Blockchain technology is revamping the banking industry by creating a range of opportunities to bring innovation to the financial services industry.

Blockchain refers to a chain of blocks that is used to record transactions which are linked using cryptography and uses a distributed system to verify each transaction for carrying out the process further. It is resistant to modification, i.e., once the data is entered in any block, it cannot be altered without the alteration of all the blocks. It is a decentralized system where encrypted transactions are added to a distributed ledger.

Blockchain Revolutionizing Conventional Banking Process

Blockchain technology has enabled the banking sector professionals to carry out the activities seamlessly without any errors. It has the ability to reduce the timeframe of various transactions that used to consume a lot of time earlier at every stage. It has eliminated this loophole of conventional banking strategy by decentralizing every process, which, in turn, can deliver transactions and securities within seconds. With the use of this technology, the transactions occur in real time that reduces the time that is required for verifying fund transfers, thereby settling transaction much faster.

The transaction costs have been drastically reduced with the use of blockchain technology by creating a ledger of providers network and enabling industries to carry out the transactions directly across nations rather than going through the banks of various countries that are involved in a particular transaction. The interactions with intermediaries have been reduced with the use of this technology that has cut the costs on maintaining the contracts and has facilitated secure transactions between two parties.

Shared Ledgers for Data Security

Banking sector is prone to many security threats that includes cyber-attacks which leads to data breaches and loss of important information. This technology has improved security in the financial transactions by creating shared ledgers and centralized systems that leads to minimum human intervention. This has helped in reducing the number of frauds and has made the data secure.

The information technology experts are integrating blockchain technology within the IT application and are designing products and services in such a way that enables banking and financial services industry to make the process efficient by exploring innovative methodologies as per the customers’ needs and preferences. This technology has majorly contributed in improving the quality of data by storing any type of data and allowing the changes only as per the predefined rules. It has automated the process of verifying contracts that has allowed faster transaction speed with inbuilt security features.

The transaction settlements have become user-optimized with the use of blockchain technology that helps in saving a lot of amount and time of the parties involved in the transactions. It has eliminated the need for back office staff for settling transactions and has allowed them to focus on delivering strategic business decisions.

The need for an intermediary has been reduced with this technology, leading to peer-to-peer transactions. It has offered capital optimization by reducing operational costs of banks by reducing the number of stages of the process and eliminating unnecessary costs of intermediaries.

This technology has enhanced contractual performance with the use of smart contracts technology by automatically executing activities as per the set guidelines and regulatory compliances. Blockchain has simplified the process of complex financial asset transactions by integrating automation in the processes, which, in turn, has enhanced transparency in the activities.

Centralised Data Collection for a Single Information Channel

Blockchain has made it possible for multiple parties to simultaneously access a constantly updated digital ledger by combining shared databases and cryptography. The virtual currencies such as bitcoin can be anonymous and secure in a blockchain environment. This technology has allowed the banking industry to access the verification details of its customers that eliminates the repetition of know your customer (KYC) process, which, in turn, has reduced money laundering activities in this industry.

The operational errors and frauds have highly been reduced on trading platforms with the use of blockchain-based technologies. It has also helped in protecting the identities of users due to its anonymous nature and allow people to carry out the transactions with high level of security and efficiency in operations.

The banks and financial services entities are using blockchain as a single source of information for transferring money, keeping records, and other important functions being recorded on digital and decentralized ledgers. It has made the process easier and faster for banks as well as customers with immediate transactions and settlements.

The financial institutions have the opportunity to tap new revenue streams with high-quality and real time data while offering seamless experiences to their customers. The banks can easily track ownership and documentation of assets by taking a range of activities in a digital environment with minimum human intervention that delivers high accuracy in processes.

Blockchain Technology Bringing a Paradigm Shift in Financial Industry

The records of smart assets can easily be added on a blockchain platform in a digitized form and can be updated in real time. The datasets can be converted into valuable information with analytics tools and a smart asset tracking system can be beneficial for financial institutions in many ways with the aid of blockchain technology.

The banks have gone beyond the use of technologies such as artificial intelligence and business intelligence in carrying out the activities in an efficient manner. The world is rapidly going digital and people prefer doing even small transactions digitally that has made it necessary for the banking sector to explore various ways of digitizing transactions and diverse processes. Blockchain technology has made small transfers feasible along with lower fee and scalability of transactions.

The IT application of banking industry has undergone drastic transformations by integrating blockchain technology and has enhanced the operations of banking system software by making the markets secure and threat free. This technology has the potential to improve the margin of financial industries and can lay a foundation to make banks profitable and valuable.