Blockchain – The Future of Banking Solutions

Blockchain has come a long way from its inception. The record high of Bitcoin which was close to 20,000$ for a single coin has amazed a lot of investment minds around. The chief purpose of a Blockchain is to serve the people investing in cryptocurrencies as a transaction ledger.

A technology that works on databases that are distributed. It uses the cryptography system to record all the transaction. The system incorporates interlinked records or ‘blocks’ which are all synchronized with identical information.

The function of a Blockchain is an open, decentralized ledger which keeps track of transactions between two parties more effectively. Also, along with it keeping track of transactions between two parties are in a more stable and verifiable way.

In simple terms, several parties have simultaneous access to a regularly updated digital ledger that cannot be modified, and therefore works as a sole source of truth. Besides, it’s practically impossible to hack.

Can Blockchain affect Traditional Banking Systems?

Blockchain has to cross several hurdles to make an impact eventually on how our traditional banking system works. A save in labor cost and overall growth in the global financial market are few things that a blockchain is capable of doing.

To my understanding, a blockchain itself is a more technically advanced way of managing ledgers. With the potentiality, it holds within it can easily have a wide-spread reach and can be implied on our traditional banking systems. They will not just transform the financial services, but along with that a lot of other businesses and industries will benefit from the use of a blockchain.

Each day there are millions of businesses and individuals serving the move of trillions of dollars around the financial system?

Surprisingly, all these transactions rely heavily on paper. Despite the digital revolution all around us, it seems that our economic system is left behind from it. Also, with the traditional paper banking system, there are a lot of cases involving delays and even fraud. So why not give Blockchain a chance to prove its worth.

Blockchain and its Endless Possibilities in Banking

Blockchain can entirely alter the financial system as we know it today. Talking about the endless possibilities of using the technology in banking related needs we will discuss a few of them.

• Payments: The use of a decentralized ledger for all the payment requirements can fasten up the process reducing the fees incurred in the process at the same time.
• Loans and Credits: The need for watchkeepers in the mortgage and credit industry will not be a requirement anymore. With blockchain, one can securely borrow a sum of money and pay interest rates which are lower when compared to the traditional banking system.
• Fraud Reduction: Considering the technology blockchain as a newer one, let’s not forget the security it provides. The potential that a blockchain holds to reduce fraud is commendable. Most of the banking systems around the world revolve around one centralized database. Which with blockchain will get evenly distributed making it challenging for the hackers to breach a system that branches out to a lot of distributed networks.
• Trade Finances: The use of a blockchain opens the door to a distributed ledger technology (DLT) which will support cross-border trading. Which otherwise is an uneconomical procedure considering the costs involved in the documentation and finally, trading processes. Along with being efficient, it is also a more ecological system as the paper requirement in this type of transaction systems are almost negligible.
  80-90% of the world trade relies on trading finances. There will be a significant influence on the use of blockchain on the market as then brands and companies will rely on blockchains for all their cross border trading requirements.
• Know your Customer (KYC):Almost $60 – $500 million is the expenditure each year by the financial institutions to keep up with their client’s KYC. With blockchain being an entirely digital way of distributed ledger system, every KYC will happen in a more organized way digitally. Thus reducing both the time and cost involved in a physical KYC process.

Final Words

Knowing a few of the endless potential that a blockchain has in it.It is obvious to say that it will have an enormous effect when incorporated with the traditional banking systems. Also, with the development of technologies, Blockchain will soon be the benchmark for banking solutions.