The Banking & finance sector has been seeing a major change in the way it is functioning for many decades after the adoption of blockchain technology.
The sector which has been prone to fraud, scams, and cyber-attacks has now found a savior in the cutting-edge blockchain technology that makes all these very difficult.
Blockchain has provided a win-win situation to banks & financial institutions, but more importantly to consumers that are always on the receiving end if any untoward incident takes place.
With all these features, banks have already started adopting blockchain in their system of business. Multiple banks have invested billions in building their own or adopting available blockchains that solve problems that banks can’t do on their own.
As the world is moving towards cryptocurrency, which is based on blockchain, banks are also moving to meet this challenge.
As per an estimate, blockchain technology in banking is expected to cross $13.94 billion with a CAGR of 51.4%.
Let’s check which are the areas in the banking & finance sector, blockchain is bringing change.
Cross border remittances
Trillions of dollars annually change hands and billions are spent as commission for this process. As banks are the only avenue doing this. It costs dearly to individuals that send small amounts and pay close to 6% to sometimes even 20% as commission for sending their hard-earned money to their loved ones. That process also takes some days to reach.
With blockchain technology, the transaction commission costs can come down to under %1 to 3% and the receiver can get the money instantly, thereby saving a lot of time.
Today, stock trading is a very slow and time-consuming process, you need to buy the stock at a particular time, and delivery also takes some days, as transactions need to pass through a number of intermediaries or agents. The current stock trading system is also prone to cyberattacks from hackers.
But, after the implementation of blockchain, it can become a 24X7 process, as it does not require any third party to process your transactions. Buying and selling of stock will be instant as stock regulations can be coded into the smart contract and it is hackproof too.
Sanctioning of loans in the traditional banking system is very slow and takes days to even months, as there is lots of documentation required. The process of loans needs to go through multiple regulations like KYC or anti-money laundering, which is a nightmare for any person or a company looking for fast loans. However, by using blockchain technology, these all processes can be streamlined, and getting loans can become easier and faster.
Blockchain helps to remove unnecessary duplication of data and provides easy access to banks.
Trade finance, domestic or international, requires a lot of paperwork and has many levels of documentation that are done by agents. These agents are based in various parts of the world, which are the backbone of any trade finance happening today. As these agents connect various banks & financial institutions to see that trade happens, the process takes a lot of time and it is a very slow process also.
If blockchain technology is adopted, all kinds of essential information can be stored on the blockchain and this information can be verified by all the parties in a single view ledger. So there is no need for an additional layer of third parties to process the documents.
To verify a customer, banks & financial institutions spend a lot of money and that money is charged to consumers. They have to go through lots of checks like face-to-face interaction, authentication, authorization, etc, and all of these steps are done by an independent service provider.
By using blockchain technology, the data of a consumer can be digitally verified by many without repeating the process by various independent service providers. As digital information is always available on the blockchain, it can be re-verified multiple times, as the data has been shared by the client to the company.
From loans, remittances, verification, finances, and trading, blockchain has been at the forefront in solving these problems that have been plaguing the banking & finance sector for decades, which could have never been imagined before.