The use of blockchain in cryptocurrency is well-known. Blockchain is a technology that has vast applications in the world of finance and banking. In simple terms, blockchain as technology uses a decentralized ledger, so transactions can be recorded. For enhanced security and quicker transactions, blockchain can be helpful. Blockchain can be a game changer in finance and banking.
Blockchain for finance and banking
Using blockchain ensures benefits for banks and financial companies as well as their customers. A key benefit is its use in streamlining processes. It takes anywhere from 30 to 60 days to get a mortgage and up to 90 days to get a loan. Using blockchain can speed up these processes while ensuring security and reducing risks.
The other benefits include:
- Transactions can be complete fast within seconds and at lesser costs. It is estimated that transaction costs could be reduced to $0.01, which would be helpful for both companies and customers.
- Significant savings can be ensured in international transactions by using blockchain. It is estimated that banks can save up to $27 billion for cross-border transactions by 2030.
- The distributed ledger offered by blockchain allows easy record keeping. Most importantly, these records cannot be altered eliminating fraud. It also helps in enhancing security.
- In financial services, lenders would be able to process loans faster. Payments can be received quickly. Stock exchanges can use blockchain to settler purchases instantly.
- In insurance, blockchain helps to prevent fraud. It also uses smart contracts to ensure quicker settlement of claims.
Leading companies in the financial sector like Visa, American Express, and Barclays have been using blockchain to improve operations. Visa has already launched cryptocurrency debit and credit cards. American Express has partnered with a grocery chain to allow customers to get more shopping reward points. Barclays is using smart contracts for derivatives and futures trading.
Challenges
While blockchain offers benefits, there are also challenges that companies need to understand. For it to succeed, it is required that companies adopt it across the board. Only when everyone adopts it, transactions will happen smoothly. Also, different blockchains are being used, and it is important to ensure interoperability between them.
It is expected that the government and regulators would come out with policies regarding blockchain. Managing them could be a challenge. Switching to blockchain involves time, effort, and cost. This can be an issue for smaller firms. They need to evaluate future benefits before deciding.
The article was authored by Bahaa Abdul Hussein and has been published by the editorial board of the Fintekdiary. For more information please visit www.fintekdiary.com
