Here are 5 ways blockchain technology is reinventing banking.
Way 1. Improve Record Keeping
One of the most compelling aspects of blockchain technology is that records stored on it are immutable. Once Person A sends funds to Person B, that record is written on the blockchain and it cannot be altered after the fact.
Immutable blocks on a single, traceable blockchain are important for a number of reasons. First, companies can immediately “forward” the block address for a transaction to their compliance department or to regulators. Second, the company can provide a receipt to both parties in the transaction for their individual safekeeping.
Whether it is reducing the number of disputed transactions, or tracking down identity fraud, an immutable ledger is a helpful tool for banks.
Way 2: Increase Transaction Speeds
Today, we have come to accept that bank payments take multiple days to process. But why is that?
Well, it’s because the technology stack has remained the same for decades, and because banks were forced to add security and compliance systems on top of already ancient systems. This translates to the current “2-3 business days” industry standard for transaction speeds.
On the other hand, blockchain technology allows fintech companies to process transactions at much faster speeds. It is true that there are many detractors who often complain that it can take up to 10 minutes to append a block to public blockchains, like Bitcoin. But private blockchains do not have this problem. Companies like Ripple are completing cross-border payments today in seconds.
Way 3: Provide Granular Permissions
Due to various online threats, we tend to keep all of our banking information private, and then manually share data with those who need access. But what if there was a way to provide certain trusted individuals, like spouses, with year-round visibility to our accounts?
This is made possible by blockchain. Not only does blockchain make it easier to share our sensitive information with others but it also gives us more granular control of who has access to our sensitive information.
We’re currently left in the dark about which companies and services have access to our information making us that much more susceptible to identity thefts and hackers. To remedy this current situation, blockchain technology provides solutions for a more “transparent permission system.”
Way 4: Support Niche Startups
Most banks are behemoths, offering a one-size-fits-all solution to hundreds of millions of people. As such, their products tend to be too generic and do not solve specific problems. The blockchain technology has enabled several startups to spring up, mimic banks and solve a particular area underserved by banks.
Blockchain technology is helping smaller companies, like us, Celsius Network to solve at least one inefficiency of the banking system. The inefficiency that we wanted to solve was the high cost of borrowing and the low reward system.
At Celsius, we will help coin holders earn up to 9% interest on their crypto holdings. We will be able to offer high rewards to our members through our peer-to-peer lending system. This p2p system will also help individuals take out loans against the value of their crypto portfolio easily and with lending terms that suit their budgets and needs.
Way 5: Reduce Red-tape and Intermediaries
The debate about whether or not decentralized technologies such as blockchain are truly secure is a heated one. It is at the crux of the every discussion about whether or not blockchain can enjoy wide adoption. Many seem to think that decentralization will give make us more susceptible to online attacks, but in fact the contrary is true. In fact, decentralization can actually help build trust networks that are more secure than current systems and it can help wipe out finicky intermediaries.
Right now, the banking world heavily relies on intermediaries such as credit rating agencies, various governmental institutions, etc. The more intermediaries it takes to connect end users to banks, the more their sensitive information is spread out. Blockchain reduces the need for intermediaries and can connect end users to banks directly. This is made possible by the granular permission opportunity presented to us by blockchain tech.
In 2017, blockchain-based cryptocurrency, Bitcoin got all of the media attention. Although cryptocurrencies seem to be the most popular form of blockchain tech, there is more to come from the technology that these digital coins.
Many believe that blockchain can help provide appropriate banking solutions to the currently billions of people who are either unbanked (with no bank accounts) or underbanked (those who have limited access to financial services, such as credit).