World famous ‘BlockChain Technology’ was surfaced in 2008. Today most of the people are aware of its potential and how it can transform the future industries. Numerous companies that are involved in the use of Blockchain technology have secured millions of dollars in funds and investment.
Blockchain Applications For Banking
The most common example that is based on Blockchain technology is Bitcoin. With a variety of upfront benefits from this technology; banks have started generating consensus on its use. In Blockchain technology transaction is made via the online channel, and then it’s being ordered in nodes or simply blocks. These nodes are later verified by the online blockchain administrators and issued with a particular address and key is generated against the made transaction. Due to its reliability, less cost and improved security it has sought the attention of financial institutions. The requirement for extra formality is also excluded like many people involved in making a transaction.
As the information in blockchain is stored with unidentifiable sources over the internet and it cannot be overwritten. Also, it keeps the previous block intact with the new ones. it works in a decentralized way, means the breach of security will not be easy as it seems now.
KSI, keyless security infrastructure instead of PKI, Public key infrastructure is used with the special algorithm to authenticate the data of a user. With data stored in nodes, it also enables financial institutions to identify any kind of encryptions as well from a database.
As the data is stored online with no centralized system, it should also be known that the transactions which once taken place with due consent cannot be altered again, means again this will support the mechanics of traditional banking.
Although at present it seems strange that, how the financial institutions would collaborate but due to the bright future prospect of blockchain technology, nobody would resist joining the blockchain pool as already several banks have come up with their similar version of the technology.
When the transaction is made, banks should verify the customer, his identity, the purpose of the transaction, legality of the transaction and other similar verifications and nevertheless, updates of his record and documentation. But for various financial services, this customer data is sought with updates regularly. The blockchain is the very clever reply to this need of bank as it ensures data sharing to stakeholders across the internet with utmost privacy and updates being circulated over the chain of the network as well. This project has already been executed initially by firm and banks to comprehend the distributed network phenomenon and its promising long-run benefits.
Payments made via banks or other financial service providers always took time, particularly when different currencies are involved or it’s for some other country. But blockchain has also revolutionized the payment method because now with an endorsement of transaction form the blockchain administrators it can be viewed but cannot be altered, means it make payments easy, fast and secure than before.
Fintech sources are assisting banks to develop their own blockchain technology system, initially to understand the fundamental aspects of this technology. Goldman Sachs, Morgan Stanley is few to discuss which can be observed, furnishing details of blockchain technology with their thorough research. There are certain aspects as discussed earlier that are prompting Banks to explore blockchain.
- It saves cost and improves efficiency.
- Fintech startups are posing competition to banks. With fast and more user-friendly payment modes.
- With the change in IT infrastructure i.e. distributed network, existing financial circle can be disrupted with new business models.
With the eyes on a possible breakthrough from blockchain, it is also advised to the banks to remain focused toward the projects they are interested to pursue in context of the blockchain, in order to avoid pitfalls in case approach was not narrowed down to a specific area. The approach adopted by banks for their blockchain projects should be vitally organized to rip maximum benefit and fast result. Compliance with regulation should be duly observed so that the consent of concerned authorities in adopting blockchain technology could be sought.