Over the past few years, innovation in the banking sector has grown exponentially.
With no signs of slowing down, 2018 is looking forward to increasingly more advances in banking technology. One of the technologies that are getting a lot of attention lately is blockchain.
Blockchain is making its way into many different industries and most notably the banking sector. It’s predicted that approximately 65% of banks are to incorporate blockchain technology over the next few years.
While you probably have heard about the Blockchain to some degree, this article will take a deeper look into the role of blockchain technology in banking.
The most basic definition we can give to the blockchain is that it’s a ledger that can store blocks of incorruptible data. While anyone can access this encrypted data, it’s impossible to alter or corrupt it making it a secure alternative to traditional banking practices.
While blockchain technology can be extremely useful in the banking sector, it’s also a convenient way of validating any value type including currency, intellectual property, contracts, deeds, and more. Since its structure is especially secure, Blockchain has become an attractive alternative to the traditional cloud environment.
Crypto currency is a digital currency which is stored on blockchain technology. Since the blockchain is decentralized, crypto-currencies such as Bitcoin and Ether are making it a fast growing alternative to standard currencies. With no third party involvement, users can utilize crypto currencies to complete transactions such as the purchase of goods, create smart contracts, voting, and more.
Blockchain Technology in Banks
With its potential to provide secure, convenient and cost efficient banking processes, blockchain technology has become a hot topic in the finance sector. Most major banks around the world have begun researching, testing, and investing in blockchain technology.
Besides for a few major financial institutions with ample resources, many banks turn to Fintech companies for assistance in implementing blockchain systems.
Advantages of Blockchain Technology:
Transparency – One of the main advantages of the blockchain is its transparency and incorruptibility. Stored network data can be shared but not altered and each piece of data is a single version. Transparency and the inability to duplicate blockchain data make it an attractive new technology in the banking sector.
Cost effective and efficient
Banks using traditional banking methods face increasing costs, inefficient systems, and the need to comply with strict regulations. Blockchain technology is extremely efficient and requires fewer parties to be involved in transactions. Blockchain systems can potentially save banks billions of dollars a year.
The need to compete
Many Fintech companies are already offering financial services with blockchain based systems. Unlike most banks these companies offer services that are less costly, faster, and easier to use. Banks will have to implement blockchain technology to compete with these Fintech companies and startups.
In 2018, we can expect Blockchain technology to become increasingly relevant in the finance industry. Blockchain is creating a major overhaul in the financial landscape as it is being implemented and adopted by institutions and companies worldwide.