Blockchain In Banking
Blockchain technology is creating hype from the day of its invention and it has gained a lot more attention in recent years. Because of its transparency and flexibility nature, blockchain is being adopted in many industries for its growth and development. Then how the Banking sector will alone be in an exception?
There are thousands and thousands of transactions and funds across various regions are maded through banks everyday, which shows that the Banking sector is also one which is predominantly used by the people. This increases the challenges in Banking but the use of blockchain can resolve some of its challenges.
Now, let us discuss the impacts of blockchain in banking sector and how blockchain helps to rebuild the present banking sector.
Major Challenges in Banking Sector
The major challenges that the banking sector faces in recent days involve the following :
1. Continuous Monitoring :
As the world is becoming digital, every transactions and payment are becoming digitalized. This increases the responsibilities of banking sector and monitor the records details periodically.
2. Time Delay :
The involvement of third parties while transactions can take 2 to 3 days or a week to complete the payment process. This time taken to process every single transaction is too long and results in user dissatisfaction.
3. Payment Costs :
The involvement of third parties and long duration for transactions results in high costs for each and every transaction. These payment costs are enormous and this creates a challenging situation for Banking sectors to engage its users.
4. Difficulty in Managing Records :
Day by day the users of Banking Sector increases on a huge rate. Hence maintaining the entire ledger which stores all the transaction records have become a complex task.
There are a lot more issues prevailing in banking and they use many technologies to overcome all these issues. The blockchain is one among them which helps in recreating the banking sectors with the fast payment process.
Blockchain in Banking Sectors
In the list of industries that uses blockchain, Banking sectors stand first in the list . 30 % of current Banking sectors use blockchain technology to create a revolution in Banking.
Banking sectors perform many steps to keep the payments secure and safe which requires a more mediator. The process of involvement of more middlemen increases expensive of banking sectors. Inturns involvement of many people will create a chance for errors and frauds. The use of blockchain in banking eliminates the use of middlemen and provides secured transactions with low costs.
Blockchain provides a high level of security for exchanging data and money. The blockchain is safe, secure, decentralized, transparent as well as low-cost.The use of blockchain in banking has the potential to solve a lot of problems.
Benefits of using Blockchain in Banking
The blockchain helps banking sector to overcome issues in costs and security. Now let us look at the benefits of using blockchain in banking sectors.
1. Reduction of Fraudulence/errors :
The use of blockchain in banking sector restricts the presence of middlemen and this results in a reduction of fraudulence activities and errors that occurs when there is a lot of manual activities involved.
2. Easy retrieving / storing of Data :
As blockchain is a distributed ledger technology, the use of this technology for the payments and transaction records storage will make it easier for storing and retrieving process and this, in turn, decreases the process time of payments.
3. Smart Contracts
A smart asset tracking system for the banks can make banking sector work effectively. A bank with wide data can turn this data into valuable information for its clients with the help of blockchain.
The banking sector is widely expanded and its users are spread all over the globe and it becomes difficult for these sectors to find whether it is their customer or a fraud processing a transaction. The use of blockchain can help the banking sector to know their customer and this eradicate error/cheating in payments.
5. Low cost and Reduced Payment Time
The use of decentralized blockchain technology doesn't involve middlemen or third parties and this reduces the time for the process of payments as each individual has the right to initiate the transactions. This, in turn, reduces the overall costs of the payment process.
Some Banks that use Blockchain Technology :
1. The American multinational investment bank started the Quorum specifically for research and implementation of Blockchain.
2. Bank of America, a major US bank has filed a patent document which was published by the U.S. Patent and Trademark Office for the implementation of Blockchain.
Core Benefits of Using Blockchain in Banking
1. The blockchain is a trusted and reliable technology which can withstand frauds, security and scalability issues in Banking.
2. The use of blockchain technology reduces the payment process time from 4-5 days to fewer seconds.
3. It will result in a low-cost transaction with faster payments.
4. Data management and data transparency are effective with the use of Blockchain.
Challenges in implementing Blockchain with current Banking Sector :
The implementation of blockchain with the current banking system completely to process smoothly is actually a great challenge. Thus if adoption of this blockchain technology allows multiple systems to work effectively, smooth operations of systems can be achieved.
Privacy and Security :
The banking sector is one where people expect more security and privacy for their data like information about their assets, transactions, and money, etc. Thus the use of blockchain provides decentralized public ledger in which providing access and permissions for each individual must handle with greater care.
Energy Consumption :
The proper implementation of blockchain in banking will result in a high amount of energy consumption and this high computing power will leave a large number of carbon footprints.This will affects the environment and thus adopting blockchain becomes a complex task in banking.
There are a lot of other challenges that are to be faced while adopting blockchain for banking, like encryption, legal regulation, etc..
Future of Banking with Blockchain Technology
Even the biggest jumbos in the banking sector have started testing and finding out the best use cases of this blockchain technology. Other than that many banking organizations started investing huge amount for the R and D process for blockchain based solutions to solve their issues.
Thus the entry of blockchain in banking sectors can resolve lots of problems and issues in the banking sector and make banking system transparent and more reliable.
Let us all hope for the frutiful changes in Banking System !!
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