Banking as we know it is going through one of the most revolutionary and world-breaking changes it has ever been through, and it’s all thanks to blockchain technology. Of course, blockchain technology first came into the mainstream when Bitcoin exploded in value almost a decade ago, but the technology has come a very long way since then.
With more people, businesses, and services now implementing blockchain technology and using cryptocurrencies, traditional banking systems are struggling to keep up with the change. In most cases, these banks will either have to implement and integrate blockchain into their services or be left behind.
To give you an idea on how blockchain technology is both disrupting and enhancing the banking industry, here are the changes you need to know about.
Making payments across the globe using traditional systems and methods has always been an incredibly slow process. Sure, companies like Visa and plenty of banks are trying to make this a faster process while ensuring the transfers remain secure and protected, but with the speed and fast pace of the modern world, it’s nowhere near where it needs to be.
Currently, these transfers are incredibly slow and tend to come with high transfer fees to pay, which, in some cases, can add as much as 7% to your transactions. Banks get money from this, and there are typically hidden exchange fees to think about. Since banks get paid and handle everything, there’s perhaps no chance they were ever going to think about lowering or taking away the fees completely.
But then blockchain came along. Offering a rapid and secure P2P system, you can make payments across borders in a maximum time of 16 hours, usually in just 30 minutes), and it costs next to nothing. Banks better up their game before blockchain puts them out of business in this area of finance, which they surely will over the next coming years.
2. Enhanced Security Features
Hand’s down, the best feature of blockchain technology is the levels of security it provides its users. This is one of the top reasons why people choose to implement this technology into their own lives and businesses. Around 71% of experts claim that blockchain technology is more secure than traditional banking services.
The truth is, blockchain technology can be used however you like. With some applications, such as cryptocurrency, the ledgers can be made completely public for anybody to be able to access. On the other hand, they can be completely privatized and inaccessible; it depends on how you want to use it.
Of course, banks are targets for people wanting access to money or people’s sensitive personal information but using blockchain technology could be the best way for these traditional establishments to protect their customers. If banks don’t offer something as bulletproof as blockchain, their customer bases will end up moving elsewhere.
3. Blockchain in Fundraising
Nowadays, banks are very reluctant to give out money to new start-up businesses since the financial collapse, and now acquiring funding on potentially risking projects is difficult. However, whereas banks have usually always held the purse strings, blockchain is taking their place.
Using ICOs (Initial Coin Offerings), start-ups can sell bitcoins and other kinds of cryptocurrencies to make money either as their core foundation as business or to help fund themselves. This is a unique and interesting (and fairly successful) way for start-ups to fund themselves and find investments to keep themselves moving forward, rather than relying on a traditional banking system.
4. Conducting Credit Checks
When you take out any form of lending money from a bank, whether that’s in the form of a loan, credit card, mortgage, etc., everybody is subject to a credit check that will determine your validity for receiving the loan in the first place, and usually what kind of interest rates you’re going to be subject too.
However, errors can appear in credit checks, whether that’s giving someone the go-ahead for money they probably shouldn’t have access too or preventing them from getting the best rates they’re entitled too. Sure, these errors aren’t incredibly common, but they do still happen, and it’s something that needs to be addressed.
With the introduction of blockchain technology, you’ll be able to conduct accurate credit checks on people in an instant since all the information is updated and maintained in real-time and will not contain errors since the ledgers constantly check themselves against every single other copy of the ledger.
If implemented by banks, this could revolutionize the way that credit checks are carried out.
Of course, anywhere where money is involved, you have to think about the impact on the stocks and shares industry. Sharing trades usually involve several third-party entities, such as CSD’s and brokers, which means trading shares can be lengthy. However, blockchain takes away all these traditional issues.
Since blockchain is decentralized, all the third parties are no longer needed since trading can happen directly on computers all other the world. This means trades will be faster and more accurate and will cost less for people carrying out the process themselves. This has the potential to greatly enhance the performance factors of the share trading industry.
6. Financing Trade Ventures
The trade financing industry is lengthy. It involves a lot of paperwork, such as bills and invoices, which means everyone involved must keep a record of everything that’s going on, and all documentation must be matching for everyone involved. Again, this is incredibly time-consuming.
As we’ve mentioned above, blockchain keeps everything updated in real-time and can be accessed privately within the people to whom it concerns or made available to the public. This means everything is easy to check and keep track of, greatly improving how trade ventures can be processed in the future.
7. Implementing Smart Contracts
Smart contracts are becoming increasingly used throughout the world in modern-day business and refers to everything, from deposit-making and lending to compliance checking and remittances.
With blockchain technology capable of handling all the money and information necessary for these processes to take place in the form of smart contracts, everything can be automated and ensured to be as accurate as possible, more accurate, and faster than its ever been before.
About the Author
Ashley Halsey is a professional writer at Dissertation writing services and Gum essays, who has been involved in many financial and business projects throughout the country. Mother of two children, she enjoys traveling, writing blogs, and attending business training courses.