Key benefits of Blockchain
Banking CIO Outlook | Tuesday 4 April 2023
Blockchain brings various benefits to the banking system, such as reduced costs, enabling faster transactions and improved security.
FREMONT, CA: Considering how blockchain is changing the dynamics of many industries, it’s no surprise that blockchain has become a buzzword in recent years. Not only in the banking industry, but also in healthcare, government, retail and other sectors, blockchain technology is expected to revolutionize the way individuals do business.
Blockchains are distributed ledgers that create immutable records of transactions among users that are openly shared among different users. These transactions are cryptographically secured to prevent tampering.
Blockchain technology will change the banking system in several ways, which are described below:
Increase security and reduce fraud: As blockchain creates a clear audit trail, it can also help eliminate fraud. The network also has multiple redundancies, so it is almost impossible to change information once it is uploaded.
Hackers cannot attack the Blockchain network and change data without leaving evidence since the network is maintained by thousands of computers. Because of these aspects of blockchain, cybercrime and ransomware attacks can compromise sensitive information and cause victims to lose hundreds of thousands of dollars.
Reduce banking and customer costs: Banking services can be significantly reduced in cost, and the quality can be improved
using blockchain.
To solve the speed and cost problems, financial institutions are implementing this technology today. Blockchain can automate tasks. Blockchain is a distributed database that is secure, transparent and easy to implement. These functions make it possible to automate certain banking activities, such as payments and loan insurance.
Reduce human error: Human errors in accounting, record keeping and reconciliation are among the most common causes of fraud, according to various studies. Cybersecurity issues are often the result of innocent human error or simple negligence in security operations.
With blockchain technology, transactions can be recorded automatically in an indestructible way. Through the use of this technology, many manual processes will be eliminated, reducing human error, improving efficiency and reducing cyber threats.
Make lending easier for borrowers and lenders: As a result of blockchain technology, lending will gradually become easier since transactions will be settled instantly. As a result, problems such as double spending and defaults can be avoided. The blockchain can also reduce the time it takes to open a bank account from days to minutes.
Eliminate middlemen and commissions: By using a shared ledger, blockchain allows people to transact directly with each other. As a result, there is no longer a need for stock exchanges and banks as intermediaries.
In the event that banks are cut out of the loop, there is an inevitable risk that their share prices will suffer. It is not so clear-cut for intermediaries such as stock exchanges, which provide important services for trading shares. Blockchain technology may still allow brokers to make money from brokerage fees, but the days of collecting brokerage fees are likely to be over soon.
