The financial industry is always changing. With new discoveries, new methods of payment and with new potential, the financial services industry is changing and it’s important that those within it know how to keep up. One of the areas that is still relatively new is blockchain in financial services.
Let’s figure it out
Professionals have been speculating about this area of finances for a long time, waiting to see how it will respond to technology and how it’ll impact business. Blockchain is a popular buzzword in the technological industries, and it’s there for finance, too. Did you know, however, that over 90% of banks are investing in blockchain as we speak?
Blockchain is shaking up the financial markets in a way that helps both financial institutions and consumers. The use of blockchain in financial services is something that’s going to become more common over time.
Blockchain in Financial Services: What Is It?
Almost everyone who knows what blockchain is knows it in relation to Bitcoin, the best known cryptocurrency out there. The mainstream banks and financial institutions know blockchain outside of Bitcoin, though. They use it to make their own transactions as efficient and secure as possible. Blockchain is easy for financial institutions to know, however, because it’s essentially a ledger of financial transactions that are all recorded. This is then sent out, published and further stored in a range of locations. When a transaction is completed, it’s added to the ledger and this helps to keep an accurate record.
There are a range of copies of the ledger, and this means that blockchain is practically immutable. It’s also one of the most secure methods of transaction – handy, given that there are so many different ledgers. It can be used to identify people, build trust between trading partners, and it can be used to facilitate easy and safe transactions, too.
How Do Banks Use Blockchain in Financial Services?
There are many ways that blockchain is used in financial services and these include the following methods:
- Cross-border transactions. As banks are looking to transfer money across borders, blockchain makes this process faster and less expensive. It’s also much more accurate!
- Trade finance platforms. Trade finance is another way banks use blockchain in financial services. This opens new settlement opportunities.
- Clearing and settlements. When records are accurately written, blockchain can make the current slow clearing and settlement processes redundant. Blockchain makes the transactions much faster, and the financial institutions are benefiting from reduced costs.
- Easy ID verification. With digital ID, blockchain allows financial institutions to identify people easily. When customer ID information is secured with blockchain, banks can increase the public trust.
- Credit reports. Everyone is impacted by their individual credit reports, and blockchain-based reporting is far more secure than the traditional server based reporting that we use today.
Blockchain used in financial services is changing the game and so many people are going to benefit from it. With the correct market support, blockchain could be an advantage to any financial service that needs it.