The digital revolution has changed the game for the banking and financial sectors. This industry started to undergo total digital transformation to make services more customer friendly and secure. When the banking and financial transactions became more digital there were new challenges in the form of cyber-attacks, which cost businesses customers and revenue. Here is where Blockchain ensures a full stack of security in financial digital transactions.
What Blockchain Means to the Banking and Financial Sector
Blockchain technology is bringing in a new phase in executing tasks with ease and decreasing chances of vulnerability to risk. With digital transactions being driven by the mobile revolution, paper currencies have become less common. A step further into digital-based transactions are today’s most talked about: cryptocurrency, an alternative form of digital currency.
Unlike typical digital currency that uses a centralized banking system, cryptocurrencies work on ‘decentralized’ control that uses a distributed ledger technology called ‘blockchain’. The blockchain is fast-emerging as a public financial transaction database for the secured next-Gen digital transaction involving cryptocurrency. This is the reason why blockchain technology is so popular.
How BlockChain is Transforming the Financial Sector
Banking is one key area of the financial sector that is more sensitive and vulnerable to cyber threats because of huge reserves they hold in their databases. In recent years, various banks around the globe have reported serious cyber threats that involved a direct attack on centralized databases causing the loss of billions of dollars.
This eventually resulted in governments issuing strict directives and now, large banks have started looking at ways to adopt advanced decentralized asset solutions like blockchain.
Surveys show top managers of global banks are starting to use blockchain in the financial sector owing to the technology’s ability to decrease costs and add security.
Blockchain offers a high level of security when receiving and transmitting data. It ensures an open and transparent network infrastructure while permitting a decentralized and low-cost operation approach. This is what makes blockchain an attractive solution for businesses in the financial sector.
Current-day transactions involve mediators to facilitate transactions, which makes the end-user banking services cost more. Whereas, blockchain holds a special advantage here by avoiding the need for an additional medium to perform transactions and provides the services at a lower cost.
Some of the key advantages blockchain offers over traditional systems include:
- Faster bank-to-bank and international transactions at a lower cost
- Provides a single client identification system that stores user details in a single instance
- Shares client information with other banks in a safe and secure way
- Blockchain can replace SWIFT transfers
Global banking institutions that have already tested and implemented blockchain report they are able to meet legal requirements and compliance with data protection regulations while using blockchain solutions.
Blockchain is also considered by many as an effective means of data processing and storage along with credibly performing authorized transactions. With more optimized payments facilitation, the distributed ledger system of blockchain reportedly accelerated transaction speeds while also saving costs associated with processing transactions. Many global securities exchanges that see continuous and huge trillions-worth transactions have also reportedly launched blockchain-based solutions.
Many firms have also reaped the benefits of utilizing blockchain for many other financial market utility services involving clearance, settlement and other intermediary functions.
Blockchain comes as a safe and effective means of dealing with digital transactions, maintaining ease in processing transactions of any size in a shorter time-frame and enhanced cost-savings. This ultimately results in enhanced quality of end-user services with efficiency, security, speed and cost-savings in place.