4 Ways Blockchain Transforms The Banking and Finance Industry

 

Blockchain technology simplifies and secures decentralized transactions and is more capable of supporting cryptocurrencies like Bitcoin, as many payments are rapidly being transformed by blockchain. Shortly, some may find that major financial institutions rely solely on it. Supply chain finance, treasury management, investment banking-related transactions, and small company trade finance are some of the few practical use cases that run solely on blockchain technology. Although the broad adoption of blockchain technology in mainstream business is yet to happen, authorities still need to be clear on handling such sophisticated technology in the finance and banking industries. Blockchain has the potential to save banks up to 30 percent, mainly on infrastructure expenses. With the aid of blockchain technology, even financial institutions may save up to $12 billion a year.

What are the Advantages of Blockchain Technology?

For some, blockchain technology appears to be a distributed ledger system that allows trading partners to maintain complete trust in each other. If someone is acquainted with Bitcoin, then the underlying technology that governs the process of transferring money from one account to another securely only happens with blockchain technology. This technology is being used securely in banking, web development companies, and other industries.

The advantages of blockchain technology are as follows:.

• By the year 2022, it is believed that global investment in blockchain technology will reach $11.7 billion.
• However, by 2024, some financial experts believe that the blockchain technology industry will be worth $20 billion.
• Another big piece of news that came to the forefront is that in 2021, it was found out by a global financial survey that there were more than 70 million registered blockchain wallets.
• Distributed 

Like the bitcoin blockchain, a public blockchain is hugely distributed and duplicated. In general, the ledger gets repeated numerous times. However, new transactions are broadcast to many people who add them to the catalog. Nobody has power over the roster, but the system is set up so that every register contains similar information.

•        Immutable

 A blockchain should keep a complete record of all the transactions. It’s pretty difficult to modify or remove transactions since many copies of the ledger exist. One needs to alter every duplicate copy of the catalog in every location. That requires the hacking of numerous computers at the same time, which appears to be impossible by nature. Most consumers are not at all concerned with technological modifications, but financial institutes and banks do care about them a lot.

•       Transfer of Funds

Sending money to another nation is one area where blockchain technology might aid them, and financial institutes are already utilizing it for remittances. Many companies transfer thousands of dollars annually, which appears to be time-consuming and expensive. Bitcoin is an alternative method to send money across the globe. Conventional banks and service providers have already embraced blockchain technology to enhance remittances and reduce the usage of bitcoin.

·       Direct Payments at a Low Cost

When someone transfers or receives money, it mainly moves via a bank, credit card processing networks, and other intermediaries. However, each step primarily adds to the complexity, and each service provider wants to be paid for their contribution to their payment.

Further, Blockchain technology helps merchants in varied ways.

1. Fees for Swipes

Merchants pay processing costs when the client pays with a card. These expenses eat into earnings, and more competition decreases prices. For various merchants, a less-priced blockchain payment network may appear to be an alternative.

2. Inadequate Finances

Customers who pay with the aid of their cheques may sometimes experience bounced cheques, resulting in losses and fines for a particular merchant company. It is also possible that electronic payments from customers savings accounts will fail, and it is the blockchain-based amount, that can provide retailers with assurance in a matter of minutes. The individual will be able to receive money with absolute confidence. Although online buyers may sometimes try to defraud you, blockchain-based transactions appear to be rapid and secure. They seemed to be more straightforward and less expensive than the bank offerings.

·       Inclusion in the Financial System

 Blockchain technologies can increase financial inclusion by keeping costs low and allowing entrepreneurs to compete against established banks. High prices, minimum balance restrictions, and lack of access may make blockchain-based solutions more appealing to individuals who eschew bank accounts. Banks don’t require assets or regular revenue; they need a mobile device to operate them. By 2025, it is believed that the total investment in blockchain integration, especially in the healthcare sector, will reach around $5.61 billion.

 Increased Security and Decreased Fraud

Banks and financial institutes worldwide are continuously frustrated by cyber assaults and financial crimes like bank account hacking, data leakage, and fraudulent activities. Blockchain technology enables faster transactions, as hackers have less time to infiltrate these systems. It aids banks in avoiding hacker and fraudster assaults while securing transaction data. As blockchain technology is mainly based on shared and decentralized ledger architecture, it is impossible to meddle with a confirmed and maintained ledger record.

From the above discussion, blockchain technology has risen to its pinnacle within a short period of time. It has achieved tremendous milestones within a limited period of time. By 2025, blockchain technology is believed to be used in 55 percent of healthcare software for commercial implementation. Although, by 2020, 60 percent of the CXOs have already integrated blockchain technology into their infrastructure.