Yes, now a days the banking industry has succumbed to the blockchain revolution by using blockchain in banking, creating a wealth of opportunities for the innovative blockchain developer. In this article, we will look at five different ways that banks can benefit from blockchain technology.
A Quick Overview of Blockchain
Where there is conventional financial transactions are facilitated by centralized financial institutions, a blockchain is a decentralized system in which encrypted transactions are entered into a ledger that is shared by multiple parties. A simplified explanation of the how blockchain transactions will work is as follows:
- The transaction is added and encrypted to a distributed ledger.
- Multiple parties with access to the shared ledger is to verify the details of the transaction without compromising the identity of those involved.
- Verified transactions are added as a irrevocable, permanent part of the shared ledger.
- The transaction is completed.
Because only verified blocks of transactions can be included in the ledger then there is no need to re-examine the authenticity of any transaction once it has been verified and entered into the ledger.
Since blockchain moves assets such as money by mere ledger entries then banks can use blockchain technology to reduce the time required to settle transactions. Rather than taking the traditional 2-3 days to verify fund transfers to the customers can receive verification in hours or minutes. As the blockchain technology for banking applications transactions will occurs in real-time.
One of the main strengths of blockchain is the elimination of duplicate data. Even though multiple parties have multipe copies of the shared ledger, they all have the exact same copy. The same data never exists in more than single location and the shared ledger is less need for the bank to reconcile accounts.
Shared ledgers can help banks for secure transaction information in a two ways. First, blockchain enables transactions to be completed much faster than is possible with centralized systems, there is little time for someone to intervene and divert payments, or to capture transaction information.
Second, in some models there are two security keys exist for each transaction a “public key” that is available to every user and a “private key” that is shared only by the parties to the transaction.
Improved Data Quality
Data quality is a bigger deals for banks and the main problem lies in the fact that so much banking information exists in more than one place. Moreover, some information can be changed by multiple parties within one institution or even by parties across institutions.
Modern blockchain technology is capable of storing any type data and allowing that data to be changed and accessed only according to predefined rules. This technology is called smart contracts and is being used to automatically verify and enforce contracts.
As banks are learning blockchain technology offers banks far more than survival and it can pave the way to greater security, efficiency, and improved customer satisfaction. In terms of cost savings, alone, banks are expecting blockchain to help reduce infrastructure costs by $15-20 billion by 2022.
By implementing smart contracts within the blockchain platform the banks can reduce interactions with intermediaries and counterparties, which can reduce costs for maintaining and executing contracts.
Bank’s earlier response to Bitcoin was to ignore and when they saw bitcoin is evolving from the currency of black markets to serving online markets, they tried to discredit it. When Bitcoin started to gain mainstream acceptance by such giants as Home Depot, Microsoft, and the Tesla car company, banks decided they’d better get with the program.
How Locus IT Can Help?
The World Economic Forum indicates that blockchain technology will be used by 15% of banks in future. The main growth of this technology in the world of finance means unfathomed opportunities for the innovative developer. Success requires a understanding of the technologies involved and the experience to pull them up. We are Microsoft Dynamics partners who provide Microsoft Dynamics implementation, Microsoft Dynamics support, Microsoft Dynamics staffing, Microsoft Dynamics training and much more.
We specialize in development of Blockchain FinTech solutions. We provide support, training, implementation services and much more. Whether you’ll need software or complete platform development, we can handle it.