Finance and banking have significantly improved in the last decade. If you have been following the trends in banking and investment, you must have heard a lot about Blockchain. Blockchain is basically a digital record-keeping technology. This technology is used for maintaining and managing Bitcoins and other major cryptocurrencies in the world.
Blockchain technology has proved to be quite useful for many banks and financial firms. Initially, Blockchain might sound quite confusing and complicated to you. However, in reality, it is a simple concept.
A Brief Insight into Blockchain Technology
Blockchain is a very powerful technology. Specially designed for virtual currencies, Blockchain helps to make Bitcoin, Dogecoin, Litecoin, and other cryptocurrencies secure and anonymous. In other words, Blockchain is a database for all the cryptocurrency transactions you make.
Widely considered as a ‘public ledger’, Blockchain consists of crucial information about the transactions you make. You can access this log anywhere, and anytime you prefer. Although this is a public ledger, it is impossible for you or any other client to modify or change its data. You can access this ledger with the help of APIs and various torrent sites.
A World Economic Forum says, about 10% of the total GDP of the world will stay on the blockchain by 2025.
What Are Blocks in Blockchains?
The ‘blocks’ in blockchain consist of pieces of digital information. Each of these blocks has three major parts. Let’s go through this section to get a fair knowledge about these three parts:
- Blocks are designed to record crucial information about a transaction. Blocks will retain information about the date, time and amount of money in a particular transaction.
- The blocks in Blockchain technology will also record the identity of the participants in a particular transaction. If you make a transaction the blocks will store information regarding your identity. However, the blocks will not store or record your original name. Instead, they will use a digital signature.
- Lastly, blocks also store information that helps to differentiate them from other blocks. Each of these blocks come with a unique code known as ‘hash’. This unique code allows you to easily distinguish one block from another.
Even though the information on two blocks appears to be highly identical, you can quickly differentiate and set them apart with these hash codes.
Benefits of Blockchain Technology
Blockchain technology has proved to be a boon both for the banking sector as well as customers. This technology can possibly save billions of dollars in processing fees for many banks. Using Blockchain technology can be quite profitable for you as well as the banks.
Here, are some of the most inevitable advantages of implementing this technology:
Reduction in Bank Frauds
You must know that one of the most common targets of cybercriminals is the banking and financial institutions. Most of the banks today make use of a centralized database. Therefore, when a cybercriminal hacks into a part of the database, they get access to the entire system.
According to reports, about 45% of stock exchanges and other financial services face cyberattacks. You must have known at least one person within your immediate who was a victim of online financial fraud.
Blockchain technology has the potential to thwart any sort of fraudulent and suspicious activity on financial institutions. By embracing this technology, banks can protect both their data and your money from online frauds.
Blockchain stores crucial digital information about its customers. This information includes unique computer codes meant for every customer and party. With the help of these codes, banks can create financial contracts easily. Moreover, you can carry out any kind of financial transaction after providing these smart codes.
Reduced KYC Expenditure
Reports suggest that banks around the world spend $60 million to $500 million to stay updated and connect with their customers. KYC feature allows each bank to know its customers properly. This enables banks to learn and verify their customers’ identities and backgrounds. KYC often allows banks to prevent unwanted incidents like money laundering or potential terrorist activities. Through Blockchain, one organization can easily access your verification information done by another organization.
Therefore, banks and other organizations can prevent repeating the KYC process. This will help various institutions to avoid spending on unnecessary formalities.
Blockchain technology can totally transform the payment procedure. With this technology, banks can process payments between clients, customers, and organizations with much safety and accuracy.
Blockchain technology makes the presence of every intermediary redundant and useless. This makes the payment process more secure, fast and efficient.
Insider Intelligence Report About Failure and Success of Blockchain
Insider Intelligence carefully studied several banks that implemented Blockchain technology. Some of these banks experienced success, while some registered dismal failure.
Moreover, the report also compiles the teachings and lessons that these banks provided after their successes and failures. So, future banks and financial institutions that wish to use this technology can learn a lot from this report.
What did the Banks Cover in this Report?
The Insider Intelligence report was formed on the basis of data collected from some of the most reputed banks of the world. These are listed below:
- Bank of America
- Citi Financial Institution
- Marco Polo
- Australia and New Zealand Banking Group
Important Takeaways from the Report
Blockchain technology created hype all around the world. Banks and financial institutions considered it to be an efficient weapon to eliminate various financial issues. However, things didn’t turn out well for all the players.
There are various challenges that banks had to face while implementing this technology. Among these, the most important ones are efficiency and regulatory uncertainty. But, banks could not overlook the potential that blockchain had to entirely change the banking model.
To successfully implement this technology in banking, banks must first decide which banking issue they need to tackle first. Thereafter, they should work out a way to efficiently apply this technology.
Four Banks and Their Blockchain Story
According to the reports of Insider Intelligence, two popular banks JP Morgan and HSBC successfully implemented blockchain. With Blockchain, these banks were capable of optimizing their banking operations.
However, banks like Citi Financial Institution and the Bank of America failed with this technology. There are several reasons as to why these banks were unable to successfully use this technology for them. The report also consists of the crucial teachings and learning that these banks learned from their failure.