Revolutionary effects of Blockchain on financial sector

Posted by Finterra on August 22nd, 2018

At present, companies are investing US million in Blockchain projects on an average, with one of the biggest sector’s being Financial, with an estimated 69% of banks interested in using this technology.

Being a business owner, the need to manage your transactions efficiently leads to lower costs and this is the argument for making  investmentsin Blockchain technology. Indeed, it can be quite helpful for financial management. Some of the benefits are as follows:

• Simplify cross-border payments

Transfer of money and virtual assets have always been a slow and expensive affair. And this is the case with cross-border payments as well. Blockchain technology can help speed up and simplify the process and cut down on the cost.

• Reduction in fraud and cyber crime

Today, 45% of financial intermediaries are victims of fraud and cyber crime every year and Blockchain holds the potential to eradicate these crimes that are a blight on the financial sector. Banking systems all across the globe are usually built on a centralized database and this is the reason they are vulnerable tocyber-attacks. Once hackers breach the database, they have full access and by the time it is discovered it is too late.

The benefit of Blockchain technology is that it is a distributed ledger where each block contains relevant information such as a timestamp etc. and holds batches of individual transactions with a link to previous block. The technology can eliminate the majority of the current crimes being committed online against financial institutions.

• Less reliance on cash with Blockchain programming

No doubt, digitization of the financial sector provides tremendous cost reductions at all levels of the business. Blockchaintechnology enables central banks to switch to digital currencies from coins and notes. For instance, Central Banks the like of the Bank of England and the Central Bank of Norway are planning to discontinue use of notesand leading to the question what will replace them..

• Blockchain technology enables easy KYC in banking sector

Financial institutions spend a lot of time, money and effort to keep up with the “Know your Customer” (KYC) regulations. Advancements in blockchain technologymean there will be very little need for KYC investments. The technology enables independent verification of clients by one company to be accessed by another company eliminating the need for company’s and customers going through the KYC procedures repeatedly, leading to a significant reduction costs.

• Easy and cost-effective payment

Blockchain plays a major role in improving payment processes. It enables higher security and lower costs for banks to process payments between organisations, their clients and between banks. Currently, financial institutions have many intermediaries in the payment processing system but blockchain would help eliminate most of them.

In a nutshell, Blockchain has brought major improvements in the financial sector. The remarkable technology helps in managing payments, loans and financial identities and reduces costs that can be eventually passed on to the clients.

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