Even though we saw the introduction of blockchain technology back in 2008 with the launch of the Bitcoin protocol, it has been only a couple of years since we started understanding how blockchain works and how the technology can help improve most of the services that we use today.
The potential of blockchain mainly comes from two of the underlying principles that make the technology possible: cryptography and decentralized distribution of data. The combination of these two principles makes blockchain viable in almost any industry.
The financial services industry is one of the key areas where blockchain can make a heavy impact. In this article, we will discuss the different ways blockchain can help improve the financial services industry.
A Higher Level of Security
The blockchain technology comes with several features like permanent data records, the private key signature for transactions, and decentralized data storage, which protects the data from any fraudulent activities.
As transaction data cannot be overridden and can easily be verified for authenticity, financial institutions can offer a higher level of security to their customers.
Faster Transaction Processing
The technology that we have today does take a lot of time in processing transactions and reflecting the balance in the recipient’s account, especially in the case of international transactions.
The blockchain technology has the capacity of handling thousands of transactions simultaneously, which means that transactions can be processed almost instantly irrespective of which part of the world they are initiated from.
Easier KYC Approval
KYC or Know Your Customer is a procedure followed by every financial institution to identify and validate customers to be sure that the financial service provided to the customer is not spent on illegal or fraudulent activities.
As per survey by Thomson Reuters, financial institutions spends around $500 million annually to get KYC done for each of their customers.
By implementing blockchain, KYC has to be done only once on an individual and the same data can then be referenced by other financial institutions.
This would mainly help customers in getting loan and credit approval instantly without having to wait for the KYC procedures to be completed each time.
Provide Crypto Trading Exchange Facilities
As the blockchain technology is the key foundation of cryptocurrencies, financial institutions implementing the blockchain technology can easily provide trading and exchange facilities for cryptocurrencies as well.
Crypto investors can then easily choose to convert their cryptocurrency to fiat currency as the same institution will process the transaction.
Institutions offering financial services have already begun adopting the Blockchain technology to provide customers with an efficient and secure medium for transactions.
As nations around the world are beginning to take a definite stand towards the implementation of blockchain technology in the financial sector, we can see widespread adoption of it all over the world in the very near future.