5 Blockchain’s potential to revolutionize the banking industry

Blockchain is revolutionizing finance by creating a transparent and secure ledger of transactions. Blockchain seems to have a bright future in the banking sector. The services of banking comprise loan, mortgage, transaction, and payment services. Blockchain transforms current commercial practices. These services depend upon the legacy processes of execution. 

Let’s say, information like verification, long processing distribution of funds and credit score mostly takes  30 to 60 days to secure a mortgage. Blockchain in banking can smoothly streamline services by reducing the counterparties’ risk and settlement. 

Now let us understand why blockchain is the future of the banking sector.

In what ways blockchain impacts the banking sector?

In a report published by Jupiter Research, banks will be able to reduce costs by more than 11% by the end of 2030 through blockchain implementations:

• Real-time verification of financial documents and authentication of KYC/AML documentation, reducing operational risks
• Markets that predict and score credit instantly, based on user activity and sanctioned data collected across a network
• Syndicates can be formed automatically, underwritten, and disbursed electronically, including principal and interest payments, reducing cost, delay, and friction in the syndication process
• Digitization makes asset management, tracking, and enforcement of regulatory controls more efficient, facilitating collateralization

The Future of Blockchain: Key Vertical Opportunities & Deployment Strategies 2018-2030, argued that the bank that will use blockchain, achieve reductions in cost for payment processing and reconciliation.  Banks offer a wide range of opportunities for both retail and wholesale customers. Distributed ledgers are also useful for identifying and eliminating inefficiencies in fields such as real-time lending, smart contracts, property valuations and verification, as well as consumer benefit claims and refunds. 

• The development of tailored financial tools for individuals; 

• A provision for liquidity management, cash management, 
• virtual portfolio management, and remittance management; 
• Risk audits and controls for counterparties; 
• Mitigating operational risks;
• Compliance with regulations;

5 ways blockchain can revolutionize the banking sector

Blockchains are public databases that store digital information. In fintech, it is one of the most widely used technologies because it provides added security for a variety of financial transactions. Information about recent transactions can be stored in the blockchain, such as the date, time, and dollar amount. Five beneficial application of blockchain in finance industry or banking are discussed below-

• Simplify complex process 

Commerce is a large ledger of data on software systems. They serve several parties connected with a single transaction. Blockchain puts all the relevant data of these parties in a common digitized infrastructure and allows efficient and faster execution of transactions. For, instance typical mortgage applications today involve the borrower, loan officer, and home valuer creating a paper trail. Using blockchain technology, all can update in ledgers instantly, automatically, and transparently.

• Increases transparency and reduces fraud

Data in the blockchain is decentralized, unlike traditional bank ledger which works on a centralized database. As information is not located in one single place therefore all parties have complete transparency. If a data breach occurs, the parties with access to the blockchain can immediately notice fraud activity.

• Carry out cross-border transactions in real-time

Sending money across international lines involves a wide setup process which includes anti-fraud checks, clearing of funds, and foreign exchange. Blockchain creates a cross-border network to exchange money at the speed at which information moves today.

• No need for a middleman

Payment transactions rely on a central processing authority or middleman. The process requires time for settlement. But blockchain provides an immediate and transparent way for both parties to pay each other without depending on a Central structure such as a payment scheme or Swift.

• Smooth customer verification process

Banking institutions spend on average $60 million a year on Know Your Customer (KYC) and customer due diligence, according to a Thomson Reuters survey. Storing information on KYC on a blockchain allows bankers to access customers’ information and share it with third parties like loan providers and insurers in an efficient way.

In the end,

In the future using of blockchain development services in banking poses many benefits to society. Additionally, you can explore Top 5 most Potential Blockchains Platforms To Explore in 2023.  The technology of blockchain is taken seriously by the banking sector as it can prove to be a great disruptor to the traditional banking industry the immutable centralized and temper-proof nature of blockchain make it ideal for streamlining everything from d reducing retail banking settlement payment and security issuance. A blockchain-based virtual currency can be used for much more than just private or monetary authority transactions.