With shared databases and cryptography, blockchain allows different parties across the globe to access an updated and inalterable digital ledger simultaneously. The blockchain is the most innovative technology that enables Litecoin, Bitcoin and other digital currencies to be anonymous, secure and transparent. Also known as a public ledger, the blockchain contains metadata about how and when the transactions occurred.
The blockchain database is secured cryptographically to prevent tampering with current and previous transactions. Since blockchain does not require a centralized authority to bring trust in the system, it reduces processing costs added due to the involvement of intermediaries.
As banks currently involve a lot of paperwork, lengthy procedures and a lot of intermediaries, it adds high transaction costs for the customers. Implementing blockchain in banking would make financial institutes more valuable and profitable.
Reputable banks across the world are experimenting with the blockchain for various use cases like record keeping, money transfers and other banking operations. By shifting the paperwork to an electronic decentralized ledger, you can access all the information from a single source without compromising security and data integrity.
Let’s look at some of the use cases of the blockchain in the banking sector.
Use Cases of Blockchain in Banking:
- Clearance and Settlements
An application built on a distributed ledger can reduce high operational costs and bring transparency with real-time transactions between financial institutes.
- Cross-border Payments
By introducing a decentralized ledger, blockchain technology can facilitate cross-border transactions quickly at lower transaction fees. It does not require the involvement of intermediaries like banks and other financial institutes.
Tokenizing traditional securities like bonds, stocks and real-world assets and placing them on the blockchain can create interoperable and more efficient capital markets.
- Loan and Credits
By eliminating the need for intermediaries in the credit and loan industry, blockchain solution can make it more secure to borrow and lend money quickly and at lower interest rates.
- Trade Finance
Replacing the cumbersome and paper-heavy bills of lading in the trade finance industry with a blockchain based solution can bring transparency, trust and security among trade partners globally.
Two banks, HSBC and Standard Chartered, have joined consortia focused on blockchain to fix trade finance. Disruption never happens overnight; you need to get in touch with the team of blockchain for hire Blockchain development experts to understand the potential of blockchain and learn how to implement it.