One of the most discussed topics today in the financial sector is blockchain banking. Besides, if it is fully utilized, it will empower banks to process the payments all the more rapidly and precisely by reducing the exchange processing costs and can be used in a lot of special cases.
Blockchain and Banking
- Blockchain and banking have a bright future. As blockchain is an open-source, real-time, and trusted platform that safely transmits information and value, it can help banks decrease the expense of handling payments. Besides, they can develop new services and products that can produce significant new income streams.
- The greatest key to transform blockchain’s potential into reality is a combined effort among banks to develop the system necessary to help worldwide payments. Banks need to work in the future to define a globally accepted, unique payment framework that can change how banks can execute the transactions.
- Blockchain gives an extremely high level of security with regards to trading information, data, and cash. Also, it enables clients to exploit the transparent network system by operating with low operational expenses with the guide of decentralization. These attributes make blockchain reliable, dependable, promising, and the most sought after solution for the finance and banking industry.
- Blockchain technology shows the way for the parties to come to a consensus on the condition of the database, by not using intermediaries. Blockchain provides a ledger, that no one manages, which could give explicit financial services like payments or security, without utilizing an intermediary.
Financial establishments perform an important function of keeping cash safe and secure for individuals and hence, the procedure set up requires a lot of mediators. By involving the mediators, it makes the business increasingly expensive. Also, with the inclusion of a large number of individuals and manual procedures, there are more chances of mistakes and frauds, which are always on the increase. Blockchain technology intends to do the hard weightlifting by securing exchanges and making the client experience increasingly satisfactory and less money spending.
With regards to a huge amount, the individual might experience troubles identified with transfer limits. Moreover, things get a lot harder when the individual tries to transfer cash from one nation to the other. If that is the case, then the user needs to be prepared for the transfer expenses and longer processing time. Considering blockchain, the transaction takes a few minutes.
Limitations with Different currencies
In the first place, there are time expenses and difficulties to face with banks. One needs to open an account in a bank and add money to it. Moreover, the bank may not trade certain currencies, limit transfers to different nations or process them for an exceptionally longer time-frame. Besides, if a bank has any inquiries regarding the activities to be carried out, they can freeze the bank account and stop all the transactions. Blockchain can take over this system by offering a more secure and less expensive approach to send P2P payment that does not require any third party.
Fiat money is portrayed by an absence of anonymity when transactions are conducted. When there is state regulation, the government would know all the information of each resident who has made a payment or a transfer. Concerning digital assets, no personal data is required. The transaction itself is constantly anonymous and encrypted. One can transact from one address to others, however, there are no identities and personal information.
Regulations by Government
Fiat cash is controlled and regulated by the state framework. All transactions go through the banking frameworks and for a specific amount of money received, the resident is bound to pay taxes. However, the blockchain is decentralized.
Blockchain disruption might be exceptionally transformative in the payment procedure. It would permit banks with higher security and also with insignificant lower costs to process payment among organizations and their customers. Blockchain would not allow the mediators in the payment processing framework.
Know your Customer (KYC)
Financial establishments spend around 60 million dollars up to 500 million dollars every year to stay aware of Know your Customer (KYC) and client due to diligence guidelines as per a recent Survey. These guidelines are intended to help reduce illegal tax avoidance and terrorism activities by knowing the requirements of organizations to check and identify their customers. Besides, Blockchain would enable an organization to check the verification details of a customer by an organization, by avoiding the repetition of the KYC procedure. The decrease in administrative expenses for the compliance department might even go down.
Blockchain is much better than the traditional banking framework. Even though it needs some space for mass adoption, it has huge possibilities and advantages in contrast with the outdated ways we interact with cash. Also, few organizations are intensely investing money to develop blockchain-based solutions. By adopting blockchain in the current situation, a lot of issues could be solved while making the system more transparent, reliable, and easy to access.