Blockchain technology has the potential to change transactions in financial service. In the last two years, Blockchain technology, also known as the distributed ledger technology, has gained visibility in India. Blockchain has the potential to create value to the tune of USD 5 billion in India across all sectors based on a report. Based on the growth and demand, People are placing their career and profession in Blockchain. Certification courses and training will secure a better profession. Blockchain Training in Trichy will enhance the career in Blockchain.
Many banks in India are investing in technology in a rapid manner. India’s eleven largest banks including ICICI Bank, Kotak Mahindra Bank, HDFC Bank, Yes Bank, Standard Chartered Bank, RBL Bank, South Indian Bank, and Axis Bank have launched the first-ever blockchain-linked loan system in the country. So, this ensures transparency in credit disbursement and also removes any communication obstacle among the different banks.
Needs of Blockchain in Banking
For NRIs, Federal Bank recently launched its Blockchain based settlement solution. Blockchain solutions bring operational efficiency, simplicity and transparency in banking operations. Also, magnifying banking experiences for customers by reducing transaction time from hours to seconds.
Blockchain technology abolishes manual processes and friction in day-to-day trade finance, digital identities and cross-border payments. Banks are using Blockchain to rewire financial markets for enhancing cash management and consumer lending while online and international payments processes. Moreover, One can conduct business quickly and securely with blockchain. This is from paper-based to Blockchain stored transaction records. Let’s discuss some benefits in the banking industry.
Trust and Transparency
Blockchain technology has the potential to change the financial service transactions. Insurance, Trade Finance, Cross Border Payments, Digital Identities have witnessed an increased adoption with blockchain. So, this help minimizes risk, eliminate wait time and increase transparency.
Banks spend a lot of time and effort to identify and validate records of the same customers. This may lead to reduce customer satisfaction and cause transactional delays. So, Banks are using blockchain to promote trust, transparency, eliminate fraud etc. Blockchain has a direct impact on reducing operational costs and improving efficiencies.
Fraud Reduction
Blockchain is one of the new technology that would reduce fraud in the financial world. 45% of financial intermediaries like stock exchanges and money transfer services are inclined to financial crimes. Most of the banking systems in the world was built on a centralized database. In cyberattack, once hackers attack the one system they get full access. So, We can reduce this by blockchain technology.
Know your Customer
Financial institutions spend anywhere from $60 million up to $500 million per year to touch with Know your Customer (KYC). These regulations help to reduce money laundering and terrorist activities. So, Blockchain will allow an organization to access the verification details of a client by another organization. This will avoid repetition of the KYC process.
Smart Contracts
Blockchain includes smart contracts that they can facilitate storage of any kind of digital information, including computer code to execute two or more parties enter their keys. However, after programming this code, Contracts could be created and financial transactions execute based on the set of criteria.
Trade Finance
Mostly Trade finance is based on paper like bills of lading, letters of credit, sent by fax or post around the world. However, Blockchain especially helps numerous parties need access to the same information. This is one of the important elements of the supply chain. Blockchain can offer a vast amount of elements in the economy and finance area.
Syndicated Loans
If the US company raises money via a syndicated loan, then it takes an average of 19 days for the bank to settle the transaction. A loan changes hands between banks then much of the communication is still done by fax. Need to find a way for separate blockchains to connect to each other in a way that changes to a loan’s ownership. However, blockchain technology will not solve all the inefficiencies in the syndicated loan market alone.
Payments
Blockchain problems could be higher effective in the payments process. However, It allows higher security with minimal lower costs to the banks. By this, they can process payment between organizations, their clients and between banks themselves. So, Blockchain gets rid of all the intermediaries in the payment processing system.
Trading Platforms
There are lots of changes happening in our trading platforms with the risk of operational errors and fraud highly reduced with blockchain-based technology. Example of some entities looking at blockchain solutions to cut costs and improve efficiencies are NASDAQ and the Australian Securities.
The blockchain is a powerful technology that allows Bitcoin, Litecoin, Dogecoin, and other virtual currencies to be open, anonymous, and secure. Its a database and it includes every Bitcoin transaction in detail. This is mainly known as a public ledger. The log contains metadata which includes the details about when and how each transaction took place. The ledger is accessible through APIs and torrent sites. So, to prevent issues in current and past transactions, the database is secured in cryptographically.
The blockchain will potentially save banks billions in cash by reducing processing costs. Banks will take the opportunity to reduce transaction costs and the amount of paper that they process. However, Implementing blockchain would be the best step to making banks as an increasingly profitable and valuable one.
All major banks are using blockchain which could be used for money transfers, record keeping and other back-end functions. Also, it allows them to track all documentation and validate ownership of assets digitally.