Is Blockchain revolutionizing Banking Industry?
Blockchain is termed as the most Powerful Technology that is being applied in many industries, from the financial sector to the government sector. According to many sources the blockchain can bring many benefits. A few are listed below.
- Blockchain can be used to validate and record each and every transaction.
- Blockchain is a decentralized network
- Blockchain does not require any third party authorization.
The most popular area or the sector where blockchain is mainly applied is in the financial sector. The reason why financial sectors are using blockchain is because of the security and transparency of data. So in this article, we are going to talk about how blockchain revolutionizing the banking industry. Blockchain in banking comes with many intuitive features pertaining to money transfers, record keeping, and other back-end functions
1.Digital Identity Verification.
We all know that online financial transactions cannot be possible without identity verification. However, in order to verify the digital identity of a person, a few steps need to be taken, such as:
- Authentication: Each time when a client or a customer needs to use the service of the bank he/she needs to prove the identity each time.
- Face to face Identity verification: It is done by video calling the customer to verify the identity.
- Authorization: The client needs to clearly mention what is his/her intention when using the service.
All these processes need to repeat for every service provider. The reason to take these steps for each service provider is they all having different databases and mechanism to store and to analyze the data and the data can only be access by the particular company. The information stored by each company will not be shared with any other parties. However, blockchain can be used to store this type of information about the clients in a distributed ledger network, where the data stored can be distributed to the computer in the network and is immutable. Passport Verification System is being used with the help of blockchain. Let discuss the cons and pros of using digital identification
- Advantage of using blockchain in the financial sector. User needs to register their identity and the process do not need to be repeated for each service providers. The information recorded in the blockchain can be accessed and analyzed by the service providers.
- Disadvantage is, identity verification on the blockchain is still in development mode and being developed. Once the information on the public network of blockchain is recorded anyone can view the information recorded; all parties in the network can view the information and can access it, so the user needs to limit the information or need to hide the private information that they do not want to disclose.
2. Accounting
The financial sector is the main sector where a lot of papers works needs to be done. The field is digitalized very slowly and still, they are using the paper works to keep their accounts. The main reason the Banking sector still using paper works is because of integrity. There is no proper digitalized format that can be applied to the Financial sector. The accounting will be the major area or domain where blockchain can be implemented and can transform the finance sector by simplifying the double entry book-keeping and other account related processes. The banks need to keep a separate record for keeping the transaction receipts, companies can use blockchain technology to create a joint register where the entries can be distributed and the data can be secured using cryptographic encryption. By doing so the records are more transparent and can withstand any type of cyber attacks.
- Advantages of implementing blockchain will allow auditors to automatically check and verify the transactions and the financial statements thus will decrease the cost and time. The integrity of the recorded data can be analyzed by hashing the information into the network. If the hashcode matches the auditor can conclude that the data is not been changed as a result the audits can be conducted in real time.
- Disadvantage of applying blockchain technology is accounting is, the blockchain is not suitable each and every case in bookkeeping and can only be used with specific areas.
3. Peer to Peer Transfer ( P2P )
P2P transactions are being common nowadays, sending money from one account to another account using Internet service is termed as P2P transfer. P2P transaction is very useful, the reason why it is widely used is the transaction can be done 24* 7 where the customer does not require to visit the bank for the transaction. But these type of services will always have some kind of restrictions. Transferring limit will be there, One can only make payments based on geography. All of these can be rectified or resolved when blockchain is introduced in the banking sector. Blockchain-based decentralized apps can be used for transferring money from one account to the other.
4. Crowdfunding ( ICO )
Crowdfunding is a method of raising money for investment by asking a large number of customers and each for a small amount of money and is being widely used in online. Blockchain is the perfect fit for crowdfunding. ICO ( Initial Coin Offering ) is a blockchain based crowdfunding and is basically a cryptocurrency. Investors can purchase the token either by Bitcoin or the physical currency for investing in a particular company. The value of ICO token will increase if the business is a success and started producing the profit. They can sell the token of ICO on cryptocurrency markets. Crowdfunding means raising an investment amount from the public to implement a concept by the company.
- Advantage of using ICO is, In order to raise the fund there is no need to use any third party organizations such and banks and financial supporters. Anyone can invest money from anywhere. ICO tokens have the ability to sell token internationally and can raise the fund from anywhere.
