What is The Future Impacts Of Blockchain in the Banking & Finance Sector? (Posts by synarionit)
Blockchain is one of those modern technologies which are influencing the banking sector and finance technology (Fintech) sector. The technology which debuted a few years ago has a great deal of potential to devise a new strategy to accomplish financial services to transform the banking industry.
Blockchain is a decentralized and distributed digital ledger that keeps a record of every transaction that occurs with cryptocurrency.
The global blockchain market size is expected to grow from USD 3.0 billion in 2020 to USD 39.7 billion by 2025, at an impressive Compound Annual Growth Rate (CAGR) of 67.3% during 2020–2025. (Source)
This advanced technology is delivering plenty of exciting and new opportunities to the financial sectors at present along with some overwhelming advantages such as transparency, enhanced security, improved efficiency, accelerated speed, and reduced costs.
Here in this article, you will get more information about the future of blockchain technology and how it will impact the finance and banking sector.
Blockchain Technology in Banking
Blockchain is based upon the principles of mathematics, cryptography, and economy to maintain a database among various types of users without any requirement of a central or intermediary authority.
A secured distributed network database which is tamper-resistant to authenticate the validity of transactions’. Each group of such transactions is called a “Block” which maintains all the transactions and stores them as well.
Some people call blockchain an anonymous digital ledger that maintains all the data to make it easy to transact. However, Blockchain is an anonymous ledger, but it keeps all the data of its clients safe. On the same concept, the ledger of a bank is linked to a centralized ledger.
Depending upon the various working areas of blockchain, the financial and banking sectors are bifurcated to get the biggest market portion during the prediction period.
Role of advanced Tech — Blockchain in Banking
Blockchain technology renders a way for pseudogroups to agree to the database state without using a third party. Through a ledger that is maintained by no one, blockchain could provide selective financial services like payment or securitization without having a middleman or bank.
Apart from this, blockchain allows the use of tools like smart contracts which automate the manual approach potentially from compliance and claims actions to share the content of a will. Below mentioned are some points which tell why there is a need for blockchain in the bank.
By combining a digital ledger for payment such as bitcoin cryptocurrency and bitcoin services can speed up the payments at a way lower charges than the bank charge.
Loans and credits
By abolishing the need for sentinel in the loan and credit industry, blockchain can make it safer to lend money and provide lesser interest rates.
Initial Coin Offerings (ICOs) are exploring a new clone of financing, which can cancel the permission to the capital from standard fundraising services and firms.
Clearance and Settlement Systems
Distributed ledgers can reduce operational costs and facilitate real-time transactions.
Applications of Blockchain in Banking
Here are some of the applications of blockchain in the banking sector. Have a look at them:
1. Digital Currency
Cryptocurrencies are a digital currency that also acts as a medium of exchange for safer transactions. It also controls the production of new units of currency. Some of the popular cryptocurrencies are Bitcoin, Litecoin, Ethereum, Ripple, etc. These currencies help to mitigate identity theft and shield them from various other risks.
2. Capital Markets
This new blockchain technology has a significant potentiality to rebuild the entire capital market trading systems. At this time, there are a lot of intermediaries involved in capital market transactions, for updation and implementation of the business transactions, there is a requirement of blockchain technology because sometimes transactions get extra delay due to time-consuming procedures.
3. Supply Chain Financing
Small and Medium-sized Enterprises (SMEs) experience several issues to get credit due to the lack of sufficient credit and collateral history. Blockchain technology can speed up the supply chain finance through better decision making, providing efficiency and security.
4. Trade & Security Servicing
Blockchain technology can also be used in the execution of custody and securities services. On the blockchain platform, securities are allotted to those involved groups which make the process easy for the admin of securities.
Benefits of Blockchain Solutions in Banking
Here are the major benefits of blockchain in addition to distributed digital ledger technology in the finance and banking sector.
1. Better Certainty
Once the data is stored in these blocks, it can’t be modified and deleted. This type of facility makes this technology safe and secure. Also, the system is distributed among millions of users; that is why it becomes impossible to hack it or shut it down. And it can be seen by everyone which makes it transparent in nature.
2. Trusted and Decentralized Transactions
The primary benefit of blockchain technology is that the method is used to track and verify the transactions, which makes an individual transaction to process without any authority of a third party or bank.
A lot of banks have started implementing this technology to render a reliable alternative to systems based on mediators validation of transactions.
3. Reduced Costs
Blockchain technology helps the banks by facilitating a digital distributed ledger method to make a system and minimize the transaction cost for exchanging instruments.
It also reduces the risks because of enhanced data integrity; thus, cost-cutting is combined with financial; regulatory compliance in some areas such as KYC (Know Your Customer) initiatives.
In the End
In this blog, we have discussed how the banking and finance sector has done a great job by adopting blockchain technology. It is the perfect time to put all your efforts into cryptocurrency and bitcoin technology. There are many more other industries which will soon adopt blockchain technology. It is just a beginning.
Originally published at https://www.bloglovin.com on December 29, 2020.