There is no denying that the present financial and banking industry is quite complex. It works with hundreds of millions of dollars a day and serves billions of people. But this system comes with added costs, delays, redundant paperwork, crimes, cyber frauds, and what not.
So, in this centralized financial world, where everything is riddled with a number of components, blockchain offers transparency, decentralization, and innovation in the trade.
Luckily, Bitcoinfy has produced an interesting infographic that will walk you through all the complex aspects of Bitcoin and the blockchain technology.
Blockchain And Financial Industry
The world’s biggest banks claim they have settled the lending transactions worth $30 million using blockchain software. According to a report by CoinDesk, for example, the Bank of England’s payment system will be compatible with the blockchain-based technology.
Blockchain is already making financial markets secure and efficient, so here is how it will revolutionize the financial industry.
Reduces Risk and Redundancy
The current global financial system is complex and costly as transactions rely on middleman and third parties to complete transactions. This whole process is carried out slowly and is quite redundant as well.
However, the blockchain technology removes the need of the third parties as transactions will be conducted now through blockchain-powered ledgers. These will be of the same nature as the one used in cryptocurrencies, which means that they can’t be tampered with.
Works As A Building Block For Electronic Identities
One of the most complicated tasks that banks have to work through is verifying the identity of customers and counterparties. Different sets of data exist for one person and working with them comes as an endeavor on its own.
With the blockchain technology, however, every dataset will be created individually and can then be identified easily. Moreover, with this, the users will have high control over their data and can decide who can access it.
Automation Of Transactions
Smart contracts come into action and can monitor when a buyer makes a payment and when the seller delivers the deal. They work just like the third party and ensure that the transactions are carried out seamlessly.
If they are combined with open banking, they can also lead to faster and automated lending decisions.
Allows Cross-Border Payments
Some users transfer thousands of dollars every year overseas, and the process comes as relatively expensive and cumbersome. But blockchain technology has improved remittances and also works on saving banks time and money as well.
It is both secure and transparent, and the cross-border transactions can be carried out seamlessly. Moreover, online ledgers are cheaper to maintain than the current banking and accounting systems.
Will Blockchain Applications Replace Banks?
As blockchain applications are already used to make the processes efficient, it certainly comes as a question, whether they will replace traditional banks or not.
According to a Deloitte report on how blockchain is changing the banking sector, financial institutions will not be replaced. Blockchain will change how they work, will make them more secure and efficient, but complete decentralization is not foreseeable.
Moreover, according to the Harvard Business Review, the blockchain will do to the financial system what internet did to the media.