The potential of Blockchain technology has caught attention worldwide. It has a huge crowd around it that are looking for opportunities to adopt and leverage the benefits of this disruptive technology in their business. The Banking & Financial Service sector is taking the lead for adopting this technology for gaining the benefits in the near future.
Following are a few examples of Blockchain in Financial Sector:
Blockchain technology could be used in both domestic and international fund transfers. While on the domestic front banks are likely to resist implementing blockchain solutions, given that they have already invested heavily in existing centralized solutions, internationally they stand to benefit enormously from such a change.
• Clearance & settlement
Currently, as per the traditional financial infrastructure, a bank transfer takes a couple of days for the settlement. With the decentralized blockchain technology, banks could settle directly and keep track of the transactions in a much better way than the existing protocols. With Blockchain technology, banks can track all the transactions transparently and publicly. Blockchain enables banks to simply settle the transactions directly on a public blockchain. They don’t need to rely on any kind of custodial services and regulatory bodies.
Blockchain has many applications in insurance. Its transparency and efficiency are helping to reduce fraud and automate compliance, among other applications. A research has found that 33 percent of insurers are planning to use blockchain in the next two years.
• Trade finance platforms
Trade finance is another blockchain application in finance to watch. Many banks are using blockchain trade finance platforms to create smart contracts between participants, increasing efficiency and transparency, and opening up new revenue opportunities.
• Buying and selling assets
Buying and selling assets like stocks, commodities, or debts are based on keeping track of who owns what. Financial markets accomplish this through a complex network of exchanges, brokers, clearinghouses, central security depositories, and custodian banks. All of these different parties have been constructed around an outdated system of paper ownership. By removing the middleman and asset rights transfer, blockchain lowers the asset exchange fees and reduces the instability of the traditional securities market.
• Credit and loans
Traditional banking institutions underwrite loans by using a system of credit reporting. With blockchain, we’re looking at the future of peer-to-peer loans, faster and more secure loan processes in general, and even complex programmed loans that can approximate syndicated loan structure or mortgages.
• Digital identity verification
Blockchain is enabling banks and other financial institutions to identify individuals using blockchain-enabled IDs. When customer identifying information is secured using blockchain, banks can increase public trust while protecting against fraud and speeding up the verification process significantly.