A blockchain, or distributed ledger, keeps a permanent record of all transactions between two parties (distributed ledger technology). A blockchain is made up of numerous separate blocks that are linked to one another in a specific order. All parties can share the online ledger via a computer network without the use of middlemen or intermediaries. This leads to faster transaction processing. One of the many benefits that blockchain technology company for the banking industry is faster transactions.

How Banking Can be Improved with Blockchain Technology?

The overall benefits of blockchain technology indicate that the banking sector should be the first to fully embrace the technology. Blockchain has the potential to improve almost every aspect of the banking industry in terms of security and transparency.

Blockchain technology has global implications and has the potential to simplify and streamline trade by eliminating processes that rely on documentation. A public blockchain can be very useful because it is not owned by any one person and all parties involved can access the data. Blockchain technology was previously only associated with digital currencies such as Bitcoin or Ethereum. That is changing now that blockchain technology has the potential to improve many aspects of banking.

USE CASES OF BLOCKCHAIN TECHNOLOGY IN BANKING

  • Faster Payments

Sending money from one bank to another or from one country to another is currently extremely difficult. Banks can use cutting-edge technologies to enable faster payments by creating a decentralised channel (cryptocurrencies). Wire transfers today can cost between $25 and $50, depending on the institution and country to which you are sending money. Blockchain technology has the potential to both accelerate and reduce payment processing costs.

By implementing blockchain, banks will be able to reduce the need for third-party verification. In 2016, 90% of European Payments Council members believed blockchain technology would revolutionise the banking sector within the next ten years.

 

  • Clearance and Settlement Systems

Blockchain allows banks to settle transactions directly and track them more effectively than existing protocols such as SWIFT.

Even the world's largest banks face numerous challenges when moving money. Even something as simple as a bank transfer must go through several middlemen and meet strict compliance standards before it can be delivered.

Only payment orders are processed via the centralised "SWIFT" payment processing method. The funds are transferred using a number of middlemen. All of these transactions are costly and time-consuming. Because of blockchain technology, banks may be able to track all global transactions. Banks can process and settle transactions instantly without the use of intermediaries or regulatory bodies.

  • Buying and Selling Assets

By eliminating middlemen and the transfer of asset rights, blockchain technology reduces asset exchange fees. According to studies and reports, using blockchain to move securities can save the global trade process more than $20 million per year.

Buying and selling digital assets such as stocks is difficult because it requires a great deal of tracking to determine which entity owns what. In the past, asset sales and purchases were complicated by a web of exchanges and middlemen. All of these transactions were based on paper records.

Because it is difficult to perform the same task electronically, most buyers and sellers must rely on a third party to manage their paperwork. Blockchain technology has the potential to transform the financial sector by preserving decentralised data of digital assets.

  • Blockchain for Accounting and Auditing

Accounting is the area of online banking that has moved the slowest toward digitization. To digitise the accounting process, a number of regulatory requirements involving data validity and integrity must be met. The adoption of blockchain technology may cause significant changes in the accounting and auditing industries.

According to experts in the field, blockchain technology has the potential to streamline compliance procedures and improve bookkeeping processes. Instead of keeping separate records of transaction receipts, businesses can add the data to a joint book. Every submission will be decentralised and accessible to all parties involved.

As a result, the records will be more secure and easier to access. Blockchain technology will act as a virtual notary, authenticating each transaction.

  • Digital Identity Verification

The majority of businesses, banks, and financial institutions still use antiquated, manual document verification processes based on paper for customer ID verification. A slow and difficult process forces customers to switch to another company. Because of blockchain integration, customers and businesses will benefit from a faster, more secure, and effective customer verification process. Blockchain technology will enable other organisations to use customer data for customer verification in other services.

Future of Blockchain In Banking

Certain banking standards, according to blockchain experts, will improve, but only in certain circumstances. To fully utilise blockchain, banks must develop infrastructure capable of running a global network. Blockchain technology alone has the potential to transform the banking industry.

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