The Blockchain technology is an open and distributed ledger which manages safe and secure transaction records of two or more parties. It is made of individual blocks of data that contain various transactions merged all together. All of the concerned authorities can share a digital ledger over a computer network. This process does not require intermediaries or third person. Speed is one of the potential benefits of blockchain technology. But, higher efficiency, including the next level of security is what makes it stand out of the crowd. Banking is one of the categories where blockchain is widely used. This article helps you understand the significant advantages of blockchain technology in banking.
- Blockchain allows its customers to generate a peer-to-peer (P2P) transaction that will enable them to transfer money from their bank accounts to another person online. Blockchain has no geographical limitations, which makes it easy for bank customers to enable P2P transaction worldwide.
- In 2016, more than 90% of the European Payments Council members agreed that blockchain would change the banking industry by 2025; because blockchain is a decentralized platform for payments that can be used by banks to facilitate faster payment systems with a low processing fee.
- Blockchain technology makes it easy for banks to track credit and loans. Tradition banking institutions use credit reporting to maintain details about loans. Blockchain allows banks to process to peer-to-peer loans, faster, secure loan transactions.
- Banks cannot carry out online financial transactions without efficient identity verification. Blockchain makes it easy for banks to have easy verification process as it maintains the records safely, which can be used in the future. Users can register themselves quickly and securely on the blockchain. The customers have not to worry about getting themselves verified often for various service providers.
- Accounting and auditing are one of the slow areas to digitize in the banking sector. Banks cannot miss out on following their strict regulations in terms of data integrity and validity. Experts think that blockchain will simplify compliance and multiple entry bookkeeping systems. The technology can reduce the task of maintaining separate records based on transaction receipts; banks can add transaction reports into an open-source register which can be distributed.
How Future of Blockchain Looks Like in Banking?
Banking professionals believe that the blockchain technology will have to match with various conditions before becoming a mainstream tech in the banking sector, and banks must develop the infrastructure that is necessary to adopt the distributed system with matching solutions. For blockchain to lead the banking sector; most of the banks around the world need to start utilizing the technology. However, it is believed that the blockchain technology will help banks to offer better customer experience and compete with fintech startups.