Blockchain is transforming everything from payments transactions to how money is raised in the private market. What’s your thought, will the traditional banking industry embrace this technology?
Yes, as blockchain in banking promises a higher level of decentralization, transparency, and security, traditional banks have already begun to adopt it. According to one of the recent reports from the Bank of America, JP Morgan and CITI are using blockchain technology and most of the other banks are willing to adopt it.
As it has grown as one of the most pioneering technologies, It has all the potential to disrupt the banking industry and enable new business models including:
- Enhanced payments.
- Improved security.
- No complicated paperwork.
- Reduces the Know Your Customer expenses.
With brief information of the above, this article will also give you a glimpse of:
- Present adoption of blockchain in banking.
Let’s get started.
- Enhanced Payments:
Blockchain technology offers a secure and cheap way of sending payments that cuts down on the need for verification from third parties and beats processing times for traditional bank transfers.
Payments using blockchain turns out to be profitable for the banks owing to lower fees, recent transactions are proof of it.
- Over 2 lakh bitcoin transactions happen per day, blockchain reports.
Fig 1. Number of Bitcoin transactions per day.
- Dogecoin and most of the other cryptocurrencies are known for relatively low-priced transactions.
- Improved Security:
Blockchain development has entered the securities domain too. With smart contracts, investors can become cautious in purchasing tokens that are not qualified for it.
Examples of improved securities purposes through blockchain:
Polymath is one of the blockchain technology companies that is building a marketplace and platform that helps people issue security tokens and implement governance mechanisms to help these new tokens meet regulations. So far, Polymath has announced partnerships with Blocktrade, Corl, and Ethereum Capital to launch security tokens on the platform.
Chain one of the enterprise focused blockchain companies has done live transactions between Citi’s banking infrastructure and Nasdaq.
- No complicated paperwork:
A lot of paperwork is engaged in the great majority of financial affairs. And maintaining invoices, bills, and contracts is responsible for this involvement. The concept of Smart Contracts influences Blockchain technology for making contracts that decide, terminate, and update the values of stipulations.
- Reduces the know your customer expenses:
Blockchain tech can help reduce the human effort and cost involved in KYC compliance. With KYC customer information stored on a blockchain, the decentralized nature of the platform would allow all institutions that require KYC to access that information. Using blockchain for KYC purposes could reduce personnel requirements for banks by 10%, equating to cost savings of up to $160M annually.
Present adoption of blockchain in banking.
Blockchain is fast acquiring more supporters. Nearly 84% of representatives from 15 territories said that they already applied this ledger in some capacity.
Goldman Sachs is making high investments into a project named Circle. Circle aims to fix the volatility issue that affects cryptocurrencies to this day. In Blockchain history, this project is one of the most funded start-ups, which is hopeful, to say the least.
The Bank of America is displaying an interest in the capacity behind Blockchain technology. The institution has filed a patent associated with Blockchain to the US Patent and Trademark Office. They aim to make a ledger that makes records secure and offers data validation.
Disruption doesn’t happen overnight, and much of blockchain technology has yet to be widely tested. It remains to be seen to what degree banks embrace the technology. One thing is clear, however: blockchain will indeed disrupt the industry.