Significance of Blockchain Technology in Banking
World’s revolutionary technology Blockchain has the potential to renovate the complete banking sector simply by providing a convenient, and secure alternative to the affluent, and time-taking banking procedures. Maximum number of banks internationally, are experimenting with this exceptional technology to reduce the sum of partakers in a transaction. Certain banks are investing in Blockchain startups, and the remaining are escorting with fintech companies that make use of Blockchain technology. This inevitable technology will alter the way of functioning of banking sectors by empowering banks to strive with fintech startups; progress efficiency to cut costs; and craft new business models. The major areas of transformation include-
Clearing and Settlement
Presently, investment banks are spending some billions of dollars to make a record of securities and loans. Based on the views of Accenture, prominent investment banks in the world can save around $10 billion by using Blockchain to upturn efficiency in clearing and settlement.
Accenture’s head of financial services, Richard Lumb strongly believes that clearing houses like Deutsche Borse, Australian Stock Exchange and Depository Trust and Clearing Corporation, which are presently led by manual settlement will be the first bank sectors to be modernized through Blockchain. Australian Stock Exchange has already on its way to the process of shifting its post-trade clearing and settlement services on top of a Blockchain system.
Financial Times states that central banks allover world are in view of the possibility of Blockchain technology use cases in their payment sectors or in making use of this technology to launch fruitful digital currencies. Commercial banks are also focusing on their own Blockchain projects as central banks are challenging the potential benefits of integrating Blockchain into their payment systems. For example, The UBS of Switzerland has turn up with the utility settlement coin whose intent is to create a digital coin which has to be used in financial markets by supplying tokens that can be made into currency upon deposit at the central banks.
Trade finance is subjugated by papers like credit and bills of lading that are directed by fax through the world. Several bankers believe that Blockchain technology is the perfect way to streamline trade finance specifically since many people need to access the same information.
As trustworthy guardians of people’s currency, lenders and bankers need to verify the individuality of both customers and opponents. Regulators anticipate banks to please themselves that clients are not illicit or criminals.
Previous efforts by banks to form a shared digital utility to list and keep customer identities up-to-date, have not prospered due to contradictory demands. Now, there are some startups operational on customer identification Blockchain systems. They embrace Tradle, Blockstack and Cambridge Blockchain.
The head of blockchain at Credit Suisse, Emmanuel Aidoo says that syndicated loan is a part that requires blockchain innovation. This is factual since if you take the instance of the U.S, if your business raises money over a syndicated loan, it takes an average of 19 working days for a bank to settle the transaction. If you repay it early or the loan changes hands, much of the communication is by fax.
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