How the blockchain technology can cause a major impact in the financial domain/industry
Blockchain is one of the most talked about topic in the financial services sector now days. In recent years this technology has spread like wildfire, and is achieving great heights of popularity. Enthusiasts are counting on blockchain to cause a major impact in the financial sector.
Blockchain will reframe many operations in the financial sector. Some of the benefits that financial sector would get from this technology include:
Reduction in fraudulent practices
Block chain is a new age technology, which has the potential to reduce the fraudulent practices in the banking and financial sector where 45% of the financial intermediaries such as money transfer services and stock exchange undergo financial crimes every year. Many financial systems around the world are built on the centralized database software which are more prone to cyber attack. Once the attacker has access to a system he can tamper with it substantially. Blockchain technology would help financial sector to get rid of some contemporary crimes that are taking place today’s digital world through distributed applications.
Know your customer (KYC)
Financial Institutes are disbursing large sums of money and are concerned with the rising cost that they have to bear to keep up with the Anti- money laundering (AML) and know your customer (KYC) norms. With the increase in cases of identity theft in the digital era, these norms are becoming more and more stringent. The KYC process has to be performed by every financial institute individually. The blockchain technology can remove the duplicacy of efforts. All the financial institutes will have regular updates of all customers in real time which will cause reduction in fraud and administrative cost in the financial sector.
Blockchain technology would allow financial institutes with higher security, reduced cost and increased speed with smooth processing payments between organizations and their clients, bank to bank transfers and even international transfers. It is currently believed that blockchain would eliminate the need of lot of contemporary intermediaries in the payment processing system, since most of these intermediaries are there just to add a level of security which blockchain can take care of.
Blockchains facilitates the storage of any kind of digital information, including computer code that can be executed between once two or more parties enter their keys, blockchain permits to have smart contracts. Once a certain set of criteria is achieved this code could be programmed to make contracts or execute financial transactions. For example delivery of products could signal an invoice to be paid.
The blockchain technology is going to bring a major change in the banking and financial sector. It has the potential to transform the traditional business models and revolutionise the existing system. This would have a great impact on the procedures for conducting and confirming transactions and various other business processes which amounts to huge expenses for financial institutes every year. This technology will increase the speed, security and will lower the cost in major operations. The repercussions would be majorly in favor of the financial sector.