For a long time Blockchain remained an unknown and unpopular technology. The only thing that got Blockchain into the limelight was Bitcoin. However, even Bitcoin did not help people determine the unmatched benefits that adopting this technology will get them.
With time, over a decade after its inception, Blockchain has now become one of the trendiest and must-have technologies. Name an industry, and you will notice that the technology will provide impressive benefits to them.
Even so, today, most companies have not yet adopted Blockchain or, are in the process of understanding how Blockchain can help them.
The size of the Blockchain technology market in 2018 was $1.2Bn and an estimated $3Bn in 2020. It is predicted to rise to $39.7Bn in the year 2025 (Statista). The projected figure is based on the evidence of how Blockchain has helped industries that have already adopted it and the way people are working to adopt it.
The banking and finance industry is a sector that will see an amazing growth following the incorporation of Blockchain.
Here we will take you through the different ways in which Blockchain has improved the banking and finance industry, and how it will secure this industry.
#1 Streamlining Payments
The most critical aspect of banks is payments. With the opportunity made available to digitise payments, it has become more important for banks to identify and explore this potential method of payment.
As we have discussed previously, it was Bitcoin that made Blockchain technology mainstream, and the banks as well as other financial institutions realised the hidden power and opportunities made available with the digital and cryptocurrencies. With Bitcoin alone reigning the finance industry, it will become very difficult to control and regulate the monetary policy. That’s precisely why they want to opt for different currencies.
Secondly, the current payment infrastructure, though it is digital in a way, is still complex. With a simpler, secure, and maybe streamlined method, it would become easier for you to control the payment methods.
While central banking systems are still contemplating this idea, commercial banks have already taken it up and have come up with their own currencies. Currently, these currencies are acting as settlement alternatives, and it is true that the central banks may not come up with a digital alternative anytime soon. However, with time, there is a good chance that the assets would be controlled with what we call digital cryptocurrency. This will ensure safer and better payments across countries without the need to convert and redirect. In fact, eventually, a single currency would be responsible for transactions globally.
#2 Protects Against Frauds
When we talk about frauds in the banking or financial systems, we are talking about money laundering and even fraudulent transactions. Currently, the transaction methods as well as the cards and monetary aspects are not completely secure. This has led to an increase in the number of frauds occurring within the banking system.
With Blockchain incorporated in your banking system, you will be able to visibly protect your assets from being attacked by hackers and thieves.
For example, if someone has accessed a card or an account that does not belong to them, it becomes difficult for you to track the person and the fraud all at the same time. That’s why you need technology backing you. Not only will you be able to track and trace the fraud, but also be able to understand where it initiated and ensure that it does not get repeated. In fact, you can even prevent fraud from occurring. As soon as you believe that the transaction is being done by someone else, you can curb the transaction, and block it completely.
This will be possible when you have a good authentication system and have merged technologies such as Blockchain with Artificial Intelligence and IoT.
This is just one part of the authentication that you gain with Blockchain. You can trace the goods to the start, which means there is no chance for manipulation in the records and the transaction logs. Apart from this, you can ensure that no one gets to enter the system and hack it without permission. This gives a lot of security to your users as well as you.
#3 Faster Settlement Processes
This is definitely one of the major aspects of having Blockchain in your banking or financial institution. You can enhance the settlement processes and ensure that they are done faster than normal. Blockchain can restructure and improve the clearing and settlement processes by inducing efficiency and reducing redundancy. Currently, a lot of manual transactions, visits to the banks and even reorganizing paperwork is being done to provide the settlement. There is a lot of to and fro as people involved are not aware of the basic paperwork. With Blockchain indulging the claim settlement, it will become easier to understand the record, share the record, and even reduce the hassles involved in getting to the paperwork. The back office will have fewer reasons to shuttle between claims, and in fact, there will be a complete record available from the start. This will enhance the speed and eventually release the claims faster.
From clearing credit defaults to getting to the core of house settlements, everything will be done smoothly as a result of Blockchain.
#4 Identity Management & Improved KYC
Managing the identity of the user and the counterparties is essential for the smooth functioning of the banking industry. If this is not done, eventually the lenders will lose a lot of money, and people will not trust these banks for the protection of their money. Gradually, it will lead to the bank. As a result, it has become important for banks to conduct proper Know Your Customer (KYC) and ensure that identity is proper. They should be able to detect frauds and people with criminal records from those who are genuine and actual customers of the bank.
For a very long time, banks have been striving hard to achieve this but, they have not been able to get it right. Blockchain can make it right for them. it will offer improved protection using cryptography, which will enhance the security of the records. Apart from this, you will be able to automate updating the records, thus ensuring you have the current KYC in your system.
From customer identification to ensuring proper customer records, Blockchain can help achieve it all for you.
#5 Transparent Services
With Blockchain tied to your banking services, you will notice an increase in the transparency of the services offered and your customers would get a complete view of the documentation and other paperwork. Basically, there is no hidden record, which leads to an increase in trust and helps you build better relationships.
The decentralised system is available for view, and there is no chance for manipulation or changes within the system. A single change is immediately recorded, which makes it easier for the banks to maintain new transactions and also record any changes within the system.
Apart from being transparent, the system is more accurate and consistent with the needs of the user. As a result, there is an increase in the number of people aspiring for these transactions and being associated with your bank.
Summing Up
Blockchain offers better security and provides the banking and finance sector the best deals, which can improve the customer experience. It can remove whatever doubts people have about digital banking, as the transactions are done under complete security, and every small transaction is recorded.
Before you adopt Blockchain into your banking system, it is important to know if it is feasible and how you aim to improve the banking segment with Blockchain technology. Apart from this, you will also need to understand how Blockchain works and where it will fit into your finance segment. Lastly, understand the best product or solution for your needs, it will help you in segmenting the solution in a better way.
See other Blockchain resources on EuroSTAR Huddle. Join the software testing community at the annual EuroSTAR Software Testing Conference.
