Blockchain revolutionizing the banking system: Uses and applications of the technology to outsmart traditional banking

 Blockchain is a potential technology that makes virtual currencies safe, incognito, and open.

In essence, Blockchain is the complete database of every virtual currency transaction. In other words, it is a book of accounts that contains how and when the transaction is taking place. Furthermore, it incorporates everyone's copy of the issued Blockchain, which is always in sync.

In the case of banking, Blockchain decreases the processing cost and saves billions of a bank. Banks are always interested in having a chance of lessening the paper's amount and transaction cost. By applying Blockchain in banking, the increase in value and profit is specific for appropriate maintenance of money transfers, record maintenance, and other back-end purposes. The full implementation of Blockchain is changing paper-intensive trade into complete electronic digitalization. It also traces all the validities and documentation of benefits digitally.

Source: Experfy

What exactly is blockchain banking?

Here, we will tell you about the exact context of Blockchain in banking. In terms of banking, Blockchain is useful for transacting records immutably and efficiently. All the performers involved in the deal can share digital ledgers in the computer networks without the help of go-betweens or intermediaries. Therefore, Blockchain is the reason behind the faster speed of transaction processing.

How is blockchain technology advantageous in banking?

Few applications of Blockchain in banking-

Keep reading to explore a few potential uses of this leading-edge technology in the banking sector. The different roles of Blockchain in banking are as follows:

• Speedy payments

 There is no transparency for mediators in the centralized system to check the details and understand the procedure. But with the arrival of decentralization, banking organizations are emerging very much by lowering costs and faster payments. A new level of service is at the state of appearance, by high security and bringing quality products to the market.

 Furthermore, third-party verification requirements will cut down and enhance the processing time for old bank transfers.

• Allowance and agreement systems-

 The distributed ledger technology such as Blockchain allows transactions to be rapid and maintains its track. A very complicated thing for the world's banks is transferring money. Before touching the destination, a standard bank diversifies the middlemen like custodial services.

Due to the decentralization system of Blockchain, keeping track of all transactions becomes easy for all banks with transparency. As a result, they don't need to depend upon the network of custodial services.

• Buying and selling assets-

Blockchain reduces the transfer costs and uncertainty of the old security market with the abolition of intermediates and assets rights. Purchasing and selling of assets such as commodities, debts, or stocks depend upon the owner of all these. The financial markets complete this process by a composite network of custodian banks, clearinghouses, brokers, exchanges, and central security depository. These parties are based on paperwork and are prone to errors.

• Fundraising-

Today, fundraising by venture capital is a very complex process. The cases that occur most of the time are:

Business people keep the decks jointly, accomplish endless meetings with companions, follow lengthy negotiations over equity and valuation. Blockchain companies are advancing very much by fundraising with various alternatives. These alternatives include STOs, IEOs, and ETO.

• Credit and loans-

The old banking institutions guarantee loans by using a structure of credit reporting. By applying the Blockchain, there is an excellent future in hastened and secure loans, peer-to-peer loans, and more multiplex programmed loans.

Banks that provide loans check the risks by considering the factors debt-income ratio, credit score, and home purchasing status. To get all the details, they must ask for credit reports of customers that credit agencies specialize in.

In a centralized system, the functions are usually unsuitable for consumers as they are full of errors. Furthermore, they are paying attention to these details as they become very much vulnerable to the risks.

• Trade finance-

Trade finance means all the money-related actions related to worldly trade and commerce. Another major significance of Blockchain is set to modernize the trade finance field. Many finance companies and banks are still dependent upon paper-based work like letters of credit, invoices, or bills. Many other managers take out these works on the internet, but that also consumes a lot of time. 

At this place, blockchain trade finance smoothens the trading process by abolishing these time-taking processes, bureaucracies.

Let's take an example:

In the old finance systems, the partners were required to organize their database documents. And all these databases need to be recoiled and rechecked from time to time. Only a single error can ruin all the hard work of all the documents. That's why they have to keep multiple copies.

How does Blockchain work here? Here, the workers don't need to make copies of all the documents to avoid errors. These details can be assessed by all the members anytime and can be updated as well.

• Blockchain as digital identity verification-

Without identity verification, it is impossible to transact money online. Although numerous steps are there that need to be done and clients don't like them too much. These steps include details for authentication, face-to-face checking, and much more. For every service provider, these steps are essential.

With Blockchain, this process becomes very much easier, faster, and trouble-free. That's the reason a lot of banking institutions are adopting Blockchain very much. All thanks to the Blockchain for normalizing these identity verifications.

Conclusion:

A lot of banking executives firmly believe that Blockchain is very much revolutionizing the banking system. In every field regarding banking, Blockchain is showing drastic changes that are very much in use today.

It will deliver a better customer experience and help traditional banking institutions to compete with fintech startups.