Blockchain is steadily disrupting a variety of industries by providing solid and secure data solutions. One industry that should see some of the most benefits of adopting blockchain would be the Fintech industry and banking. Both customers and the institutions themselves would appreciate faster, more streamlined services and lowered operation costs. But how exactly could blockchain take the financial industry to another level? First, let’s take a look at what exactly blockchain is.
Blockchain
Cryptocurrencies and blockchain go hand-in-hand as they were introduced together. At its core, blockchain is a distributed database that can hold intense amounts of digital data. It is often referred to as a distributed ledger where the ledger is spread across the network. This data is often referred to as immutable, which means that it is unchangeable. Essentially, blockchain features data that cannot be altered or changed at any point. However, data can be added to the blockchain. Cryptography is used to protect the data and make it tamper proof. This leads to a permanent record of data. But what are some of the specific ways that blockchain can improve the banking industry?
Identity
The use of blockchain by banks could lead to better identity authentication and protection of transactions. Fraud, identity theft, and different forms of money laundering are not only devastating to the individual, but they also cost the institutions billions of dollars every year. An outdated identification process and untrustworthy background checks can result in vulnerability and increase the risk of data intrusion. With blockchain solutions, identities can be seamlessly checked but also continually updated. Blockchain also has the capability to speed up the identity verification process while lowering the costs for the institutions.
Audits
Whether it be a bank or a business or even an individual, auditing financial records can be tedious and time-consuming. Utilizing a blockchain solution could potentially lead to enhanced auditing options. Since transactions that sit on the blockchain are permanent and cannot be changed, auditors are able to access completely true and unaltered data. This would lead to quicker audits and improve the overall efficiency of accounting systems.
Peer Payments
When sending funds to peers through the traditional banking systems, you are not actually the one sending the payments. Basically, you are authorizing your bank to send the payment for you and that takes time and expense as it consumes the resources of multiple entities. This also creates multiple and completely separate records of the transaction. This results in multiple points of vulnerability to the data and records of the transaction. Blockchain is able to create a peer-to-peer cash system by leveraging characteristics such as the distributed ledger system, security and efficiency of blockchain along with cryptocurrencies like Bitcoin.