Cryptocurrencies and the blockchain technology that underpins them are being heralded as the next big thing. The financial sector is one area where new technologies are anticipated to have a significant impact. Despite the fact that blockchain technology is still in its infancy, it is widely regarded as a game-changing, disruptive invention with the potential to dramatically transform the banking scene in the coming years.
A blockchain is a decentralized, unchangeable database that enables the recording of network transactions. Blockchain has grown in popularity in recent years as a technology that may be used in a variety of industries and there are many startups based on this technology. Blockchain technology provides for the permanent recording of transactions in a block. It eliminates the presence of third parties.
Benefits of Blockchain technology
In principle, blockchain might revolutionize the banking and financial industries. It has the potential to cause considerable change in the financial industry.
- Transactions are processed more quickly and at lower costs.
- There are no middlemen in the transaction authorization process.
- Decentralization and, as a result, autonomy from central repositories
- There will be less paperwork and bureaucracy.
- Integrity of data
Blockchain in International Payments
If you want to make a payment using your bank account, it may take several days to complete. The transactional cost of sending a payment internationally might be high.
When it comes to blockchain finance, both central and commercial banks throughout the world can use the new technology to process payments and maybe issue their own digital currencies. Traditional technologies are slower and more expensive than bank blockchain for cross-border payments. Blockchains are global ledgers that are not constrained by borders and do not require middlemen. Regardless of whether the transaction is local or cross-border, the slowest blockchains may complete a transaction in as little as 15 minutes, while the fastest can accomplish it in seconds.
Blockchain In Stock Trading
Blockchain-based trading transactions eliminate information redundancy and hence increase performance. As a result, minor transactions among groups of traders can be handled swiftly outside of the blockchain, with only the final transactions being recorded on the blockchain.
The use of blockchain for stock trading can significantly eliminate the need for intermediaries. In the absence of a third party, regulations may be readily put into smart contracts and deployed, ensuring that no one can cheat another.
Blockchain in Lending
Syndicated lending is when a consortium of lenders, usually banks, provides loans to individuals (a syndicate). Due to the several parties involved, standard bank processing of syndicated loans tale longer days. Various rules, such as Know Your Customer (KYC) and Anti-Money Laundering (AML), must be followed by financial institutions (AML). Because of the large number of parties involved, authorizing a syndicated loan can take a long time.
Blockchain in Trade finance
Many trade finance activities, even in today's disruptive age of technology, still include a lot of paperwork.
Every middleman in an international trade prepares all documents on their own to keep their ledger up to date. A single ledger may be maintained and viewed by all parties engaged in a transaction, and it can be updated in real-time.
By eliminating time-consuming paperwork and bureaucracy, blockchain-based trade finance can streamline the entire trading process.
Blockchain in Accounting, and Audit
Standardization using blockchain would enable auditors to automatically validate the most critical data in financial accounts, lowering costs and saving time. Blockchain technology makes it simple to prove the integrity of electronic files. One method is to construct a hash string for a file that represents its digital fingerprint and then write that hash string onto the blockchain as a timestamp.
Credit reports on Blockchain
Data verification costs and difficulties are reduced with blockchain-based credit reports. Furthermore, because the data is no longer maintained in a central repository, it is returned to individuals. Before consenting to a mortgage, loan, or credit card, a bank must run a number of checks to ensure you have the financial ability to repay the money as well as the terms of the agreement, such as interest.