How Is Blockchain Technology Helping the Banking Sector?
The blockchain technology market was only $1.1 billion in 2020, and in 2023, it was worth USD 17.6 billion. Blockchain is one of the burgeoning markets powered to grow with a CAGR of 87.7% from 2024 to 2030, which will profoundly reach a market size of USD 250 billion by 2030.
Industries including payment, cybersecurity, real estate, retail, logistics, healthcare, etc., are benefiting from blockchain technology development . But, when it comes to implementing blockchain in the finance and banking sector, there is much consideration. In this article, we will discuss some use cases and benefits of the application of blockchain technology in banking and its impact on this industry.?
Hmm, but let me explain to you what blockchain technology is, as long as you have no idea about that.
What is blockchain technology??
Blockchain technology is an advanced database mechanism that stores data in blocks and shares the data most securely and transparently within nodes of computer networks and business networks. The technology stores information in digital format since it is a database. It contains encrypted data in a block that is linked together in a chain with numerous other blocks with different encrypted data.?
Importance of Blockchain Technology in Banking?
Blockchain is a distributed database that stores records of digital transactions in such a manner that they can be verified and processed between two parties and crosschecked by a third party who is not necessarily trustworthy. The ledger is made up of a chain of blocks, and each of the blocks contains a record of several transactions. They virtually cannot be changed after being added to the chain and, therefore, provide tamper-proof solutions. Blockchain also employs the technology of cryptography that only allows the proper party to access and validate them.
Top 5 Ways Blockchain is Helping the Banking Industry?
Blockchain technology helps financial sectors make more secure transactions and minimizes errors. Eventually, it is right to say that blockchain is transforming the banking industry. Let’s explore several benefits a bank can experience while collaborating with a blockchain development company:??
One of the biggest benefits of incorporating blockchain technology in banking is, of course, faster transactions. With blockchain technology, any transaction can be done in seconds and faster than the traditional method. In traditional transaction methods, banks give middlemen authority to proceed with the payments, which used to take more time to complete payments. Blockchain eliminates middlemen, leads to quicker transactions, and allows banks and customers to complete more transactions.?
领英推荐
2. Improved Security
In banking, security is the most important concern. Blockchain technology applications improve the security of transaction information. First, they will be able to accomplish a transaction in a short time and minimize the instances when somebody, for example, captures the information about the transaction or tries to redirect the payments. There are two security keys for each transaction. Each user of the system maintains a public key while the private key is provided to each party involved in a particular transaction. The record of a transaction is also fixed after the verification process is over.???
3. Offer Digital Currencies?
Banks will be of aid to the use of blockchain through the effectiveness of a digital currency. Thanks to it they can use digital money to finalize numerous transactions. With the use of cryptocurrencies, it will be easier for banks to clear and settle financial trades more efficiently and securely. There is also an extension that banks will look to create a digital currency to be a standard currency in the future.
4. Cost Efficiency?
when integrating objects like smart contacts into a platform, the banks can minimize on their dealings with other parties. They can also reduce the expenses of managing and implementing contractual relations.? Banks can also be able to cut the transaction costs between banks and other banks on their own.?
5. Better Data Quality?
Contemporary blockchain can contain any digital information and permit it to be accessed in accordance with specific rules and regulations. Smart contracts are a technology that can be used to self-execute and authenticate contracts.? By moving the banking information into shared ledgers they gain several properties of the blockchain immediately.?
Wrapping Up!?
If you want to see the live examples of banks using blockchain technology services, they’re JP Morgan, Swedish Central Bank, HSBC, etc. As you have seen, the top benefits of blockchain are faster transactions, secured transactions, cost efficiency, etc. However, the technology also helps the banking industry reduce errors and have better accountability. With blockchain technology, banks, fintech companies, and financial institutions offer better and more secure services to their customers.?