Hacking blockchain requires a James Bond-level villain’, says Kharim Lakhani, a Harvard Business School professor. Of course, the said villain is hard to find in reality.
So, your blockchain-dependent banking processes are secure and safe.
Blockchain is one technology that is much appreciated and explored these days. The technology is being used across industries to increase efficiency, reduce the time-frame, investment cost, avoid manual ledgers, and all while being safe and secure.
A few of the emerging blockchain companies include ScienceSoft, Ripple Labs Inc., Blockchangers, ChromaWay, OpenLedger, Ezetech, Limechian, and Intellectsoft. The advantage of using blockchain in banking is its characteristic features like decentralized trust, improved security, immutability, and increased efficiency while cutting investment costs. Read on to know how blockchain technology is potentially used for the banking services sector.
Role of blockchain in banking services: 4 Use cases
Blockchain technology provides trust for the participating parties and comes to an agreement without intermediaries. Further, blockchain provides self-executing contracts -smart contracts automating manual processes like compliance, claims processing, and content distribution. It has all the potential to disrupt the banking industry and enabling new business models including:
1. Improved payments:
Payments using blockchain turns to be profitable for the banks owing to lower fees. The recent transactions are proof of it.
¢ Over 300,000 Bitcoin transactions occur per day, blockchain reports.
¢ Bitcoin Cash and TRON are known for relatively low-priced transactions.
¢ Ethereum network settled USD 1 Trillion for the calendar year 2020.
¢ Cross-border payments generated USD 224 billion in revenues in 2019.
¢ BitPesa facilitated B2B payments in Nigeria, Uganda, and Kenya.
¢ SatoshiPay is an online cryptocurrency wallet that facilitates micropayments.
2. Improved cross-border settlements:
Moving money around the world is a herculean task that takes days together for the banks. It’s a painful process for both the banks and consumers. The reason is that it involves multiple currencies, service fees, tax allocation, and dividends. Moreover, it has challenges such as limited visibility, system-level variation, voluminous transactions, and data accumulation.
Recent projects like Ripple and R3 bring efficiency to the banking sector. They connect the financial institutions to the common ledger and thereby increasing the transaction efficiency.
¢ Ripple’s xCurrent provides banks two-way communication protocol which is faster too and facilitates real-time messaging and settlement.
¢ Likewise, xRapid is being demonstrated to settle the cross-border payment in a short duration than expected.
¢ Switzerland’s central bank used R3 technology to settle transactions between financial institutions with digital currencies.
3. Improved securities
Blockchain development has entered the securities domain too. With smart contracts, investors can become cautious in purchasing tokens that are not qualified for it. Incorporation of international Know-Your-Customer (KYC) and anti-money laundering (AML) rules prevent them from fraudulent transactions.
With blockchain, one can design near-instantaneous settlement systems and consensus mechanisms. Issuing securities on the blockchain makes it readily compliant, becomes more liquid, lowers asset exchange fees, manages the cap table efficiently, and facilitates 24*7 trading.
¢ Polymath has successfully partnered with Blocktrade, Corl, and Ethereum Capital to launch security tokens.
¢ Chain “ one of the enterprise-focused blockchain companies has done live transactions between Citi’s banking infrastructure and Nasdaq.
4. VC fundraising
Venture capitalists are increasing their blockchain investment as it gives massive returns from early investment (Bitcoin and Ethereum); a self-sovereign identity that could prevent data breach and exploitation scandal; and a spike in location-based funding.
Entrepreneurs here sell tokens or coins to raise funds and thus facilitating fundraising without a VC firm or a traditional investor.
¢ Blockchian.com has taken on USD 120 million in its new VC funding, raising the company’s private valuation to >USD 3 billion.
¢ Tokenizer converts assets like stocks to Asset-backed tokens. It helps the companies to become more productive and accessible.
¢ Telegram has raised USD 1.7 billion through Initial Coin Offerings (ICOs).
¢ CoinList is helping blockchain companies to structure compliant ICOs and legal matters.
To summarize, blockchain technology is more promising in the banking industry. Investing in blockchain will enable the banking services to deliver a better customer experience and stay ahead of the competition.
