Blockchain is more than a disruptive technology across multiple industries, as it is already helping enterprises transform into operating more securely. It’s a more efficient way to store confidential data and make financial transactions. Here are ways that blockchain is affecting the financial industry.
How Banks are Transforming with Blockchain
Although banks have trailed other industries when it comes to digital IT infrastructure, they have been quicker to acknowledge and adopt blockchain. It’s the underlying technology used to transfer cryptocurrencies like Bitcoin, but can be used for many other reasons.
A blockchain can be thought of, just like the word suggests, as a chain of connected blocks. The data in these blocks are scattered throughout the network, making it difficult for hackers to gain access to all the data. Technically the blockchain is a secure ledger between network members and serves as a list of transactions. No one individual controls the ledger, in which updates are available to all members who have a digital ID.
Blockchain Benefits to Banks
Financial institutions can benefit from blockchain technology in multiple ways, such as reducing fraud. The technology can reliably block hackers and DDOS attacks. By cutting fraud, a company can increase profit margins. The technology improves transparency and makes auditing more accurate without a central authority.
The blockchain also allows for faster transactions at lower costs. The technology has the potential to serve various business functions that draw from databases. Since it’s a private communication platform, it can be used for transactions between lenders and borrowers. It also has the power to eliminate intermediaries, which helps lower transaction costs. Smart contracts, which execute automatically when certain conditions are met, are helping make the blockchain transaction a more trusted experience.
The future of blockchain is considered bright in the financial industry since it will help financial organizations be compliant with government requirements for privacy. It will also help eliminate delays involved with financial services tied to duplicate record-keeping.
Blockchain is a form of confidential group record-keeping that is quickly gaining favor in the banking industry. Its distributed ledger technology helps make record-keeping more secure and efficient. In order for the technology to be most effective, it must be embraced by all relevant members of an organization.