Can Blockchain Technology Impact Banking? We Analyse this Important Trend
The financial services industry is all set to undergo a sea of change. This is because of blockchain technology, which powers bitcoin transactions, offers many advantages compared to traditional banking. These include better accessibility, greater transparency, lower fees, and quicker transactions. Ignoring these benefits would be like using a handheld pager for communication instead of a smartphone.
Even NASDAQ head Bob Greifeld has predicted that the global economy is ready for this change. Financial biggies such as Visa, Standard Chartered, DBS, and ING are already paying attention to the blockchain.
Fintech is all agog about blockchain’s future. This industry has proved itself over the past few years with useful contributions to online forex trading, payment gateways, and bitcoin transactions. Fintech leaders believe they can go a step further with blockchain.
Though bitcoin has been used as a currency for quite a few years now, it is only recently that Fintech has attracted the financial sector’s attention. Fintech is expected to make an impact in three important ways: new customer generation, banks’ compulsion to make more profits, and tech improvements that merge the two.
Today’s young generation of clients has grown up on peer-to-peer dealings. They include profitable tech businesses, their employees, angel investors, and millions of closely networked customers.
These customers are accustomed to online transactions, crowdsourced wisdom, and real-time results on a personal as well as professional level. Whether reading about suitable software solutions and SaaS trends in a reliable B2B directory, hiring the closest Uber cab, or getting details about the latest restaurant deals, these customers are ready to embrace Fintech’s promise of transactions without middlemen.
Fintech’s importance lies in the growing use of beneficial technology such as internet infrastructure and access, bandwidth, security, mobile platforms, and mobile app development. All these advancements are making this alternative transaction model go mainstream.
Banks face the major issue of cyber security and Fintech is actively addressing this problem.
This has resulted in industry-wide adoption and attracted more VC spending.
Investment in blockchain was estimated to be $3 billion in 2013 and grew to a whopping $20 billion in 2015. The resources and capital being invested in blockchain show that this technology is growing at full speed.
Nobody is sure about the impact blockchain, and its improved version will have on banking over the next few years. But right now, it offers three main advantages over conventional banking which is why Fintech is confident about its future.
Conventional financial transactions consume a lot of time as they travel through some third parties. For instance, a normal payment goes through a gateway, stock exchange, or clearinghouse. As many as ten entities may be involved in the transaction, exchanging messages, reconciliation, or security which means the seller receives payment only after days.
Blockchain shows the potential to reduce this extended timeframe by decentralising everything. It can do in seconds the securities and cash transactions that conventional stock trading takes three days to complete.
Similarly, the forex experience offered by Fintech where buyers and sellers deal using an online platform to trade in real time looks a promising technology for the banking sector.
Compared to firewalls, mobile encryptions have the advantage of allowing users to access transaction details anytime, anywhere with internet access. Authorised parties can access the transactions stored in blockchain’s shared ledger.
Blockchain records and locks transactions and users can access the full historical data easily. Thus, it offers greater transparency compared to the more secretive traditional banking sector.
Fintech still faces the problem of reliable security.
