With its smart functionalities and security against cybercrimes the blockchain technology is revolutionizing the banking sector one day at a time. Several banks have already adopted blockchain technology to attract rich investors who own valuable assets worldwide. Today there is no way that banks and other financial institutes can afford lagging behind in matching the pace of this tech-driven world. Banks and financial institutes have to be up-to-date to compete with the trends in the market.
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Multiple banks have already started using the blockchain technology for their benefit. Every single digital transaction ever made through blockchain is stored securely in the form of a verifiable record. The information entered on blockchain can never be erased. Apart from banks the blockchain technology has been adopted by regulatory authorities, entrepreneurs, technologists, scholars etc. The market of blockchain technology in banking is estimated to hit a high of US $13,946 million by 2026.
The blockchain technology is reshaping the banking sector worldwide in different ways, some of them are listed below.
- Speedy payments and transactions
Through blockchain technology money is transferred by easy ledger entries. This means there is no need for a centralized mediator to verify the transactions. The use of blockchain technology significantly reduces the time required to verify and resolve transactions.
- Secure and enhanced data quality
Banks and other financial institutions need to handle a massive amount of data. In the traditional banking structure, the banks do not store data in a single place. This means that the data is accessible to anyone and it can be changed or become outdated. But with blockchain technology any type of data can be preserved. The shared ledger system allows anybody to work on a particular type of data copy making way for quick and secure transactions with enhanced data quality.
- Ditches complicated paperwork
The conventional method of banking involves plenty of paperwork and maintaining them. Smart Contacts is changing the way banks handle and maintain the paperwork. Smart Contacts is a concept of blockchain that helps make contracts that can make necessary decisions such as decide or terminate contract and also update values of stipulations. This technology helps get rid of unwanted paperwork and also makes all transactions hassle-free.
- Fraud detection and enhanced security
Data leaks, bank account hacking and other financial crimes are matters of concern for all banks and financial institutions. Blockchain technology in banking uses cryptography standards to tackle these cybercrimes. Cryptography standards are developed with functions like private keys, public keys and hash functions. The technology is developed on a shared ledger system which cuts out the dependency on a single body. This in turn helps banks to avoid cyberattacks and ensure secure transactions.
The growing use of blockchain is majorly transforming and reshaping the banking sector. Blockchain in banking is disrupting the conventional systems and proving the existing systems to be outdated. In the future, blockchain-based solutions are estimated to reduce the annual fraud losses by billion dollars.
The need for a secured database of client information that can be shared it through various banking institutions is rising. It helps in reducing time, cost, and effort in trading and provides more security and transparency. It won’t be wrong to say that blockchain technology in banking has now become the driving force to overcome the challenges of efficiently transforming into a cashless society.