Blockchain technology is gaining traction and changing the finance industry as we know it. Banks have long held on to traditional banking methods, but to survive in a digital future, they need to implement new banking technology. This is the only way to give a better banking experience to their customers while staying afloat in this new technological era.
What is Blockchain?
Created in 2008, Blockchain is an encrypted digital ledger that stores linked ‘blocks’ of data. Blockchain’s open ledger framework can store a variety of information in these blocks such as account data, transaction processing, contracts, and more. Since the blocks cannot be altered once they have been stored, blockchain offers a very secure and incorruptible system.
Blockchain innovation was produced close by one of the first and most well known digital currencies, Bitcoin. Bitcoin resembles computerized money, with each Bitcoin’s
Information stored on the blockchain. Since it’s decentralized, Bitcoin has found a solution for the issue of double spending, without involving a central server or a third party.
While Bitcoin is the most popular cryptocurrency running on the blockchain, there are other cryptocurrencies in use. Etherium is another well-known alt-currency that runs on blockchain technology and offers additional features like smart contracts.
Why is blockchain one of the most prominent new technologies today?
- Offers fast and efficient banking processes
While traditional, legacy-based banking systems are considered to be lengthy and tedious, blockchain offers simple, rapid and efficient banking processes. There are fewer participants required for each transaction making it very cost effective.
- Blockchain technology is decentralised
This means that there is no involvement of middleman or third party, which makes blockchain a very secure banking option since it’s impossible for computer systems to be hacked leaving sensitive data vulnerable.
- Impossible to manipulate sensitive data
The blockchain ‘ledger’ enables transparent banking, in the same time keeps the data incorruptible. Since it’s difficult to manipulate sensitive data on the blockchain, it’s become the most crucial innovations in the banking sector.
- The benefit of optimising regulations
Banks are obligated to comply with Know your Customer (KYC) regulations to prevent money laundering and fraudulent activity. Compliance with KYC can be very costly for banks and blockchain can reduce fees and administration time significantly. Since the verification of a client can be processed by a single organisation and then stored on the blockchain, this verification can be accessed by any other organisation without having to complete the KYC procedure again.
Are banks using blocking blockchain technology yet?
Yes. Some of the world’s biggest banking institutions such as JP Morgan Chase have recently announced the launch of blockchain-based technology into their systems. Blockchain’s ability to provide transparent, speedy, and secure cheap transfer has made it one of the hottest banking trends in 2017.
Additionally, many banks have begun to invest in Fintech companies to help assist in the creation and implementation of blockchain based systems. Bank of America and JP Morgan Chase are just two of the major banks to partner with tech companies to develop blockchain-based systems. As an efficient substitute to traditional banking methods, blockchain can play a critical role in the future of banking technology.
However the potential of blockchain is claimed widely to be par with initial stages of commercial internet, it is essential that the firms know the key features of the innovation and how it can find a solution for the internet enabled exchange of data on one hand, current business issues on the other, the blockchain can engage in the exchange of value. Banks need to determine feasibility, identify opportunities and impact, and test proof of concepts.