Blockchain technology is gaining traction and changing the finance industry as we know it. Banks have long held on to traditional banking methods, but to survive in a digital future, they need to implement new banking technology. This is the only way to give a better banking experience to their customers while staying afloat in this new technological era.
What is Blockchain?
Created in 2008, Blockchain is an encrypted digital ledger that stores linked ‘blocks’ of data. Blockchain’s open ledger framework can store a variety of information in these blocks such as account data, transaction processing, contracts, and more. Since the blocks cannot be altered once they have been stored, blockchain offers a very secure and incorruptible system.
Blockchain technology was developed alongside one of the first and most popular crypto-currencies, Bitcoin. Bitcoin is like digital cash, with each Bitcoin’s data stored on the blockchain. Since it’s decentralised, Bitcoin has solved the double spending issue without involving a third party or central server.
While Bitcoin is the most popular crypto-currency running on the blockchain, there are other crypto-currencies in use. Etherium is another well-known alt-currency that runs on blockchain technology and offers additional features like smart contracts.
Why is blockchain one of the most important new technologies today?
1. Offers fast and efficient banking processes
While traditional, legacy-based banking systems can be tedious and lengthy, blockchain offers fast and efficient banking processes. There are fewer participants required for each transaction making it very cost effective.
2. Blockchain technology is decentralised
This means that there is no middleman or third party involved, which makes blockchain a very secure banking option since it’s impossible for computer systems to be hacked leaving sensitive data vulnerable.
3. Impossible to duplicate sensitive data
The blockchain ‘ledger’ offers transparent banking while keeping the data incorruptible. Since it’s impossible to duplicate sensitive data on the blockchain, it’s become one of the most important innovations in the banking sector.
4. The benefit of optimising regulations
Banks are obligated to comply with Know your Customer (KYC) regulations to prevent money laundering and fraudulent activity. Compliance with KYC can be very costly for banks and blockchain can reduce fees and administration time significantly. Since the verification of a client can be processed by a single organisation and then stored on the blockchain, this verification can be accessed by any other organisation without having to complete the KYC procedure again.
Are banks using blocking blockchain technology yet?
Yes. Some of the world’s biggest banking institutions such as JP Morgan Chase have recently announced the launch of blockchain-based technology into their systems. Blockchain’s ability to provide transparent, speedy, and secure cheap transfer has made it one of the hottest banking trends in 2017.
Additionally, many banks have begun to invest in Fintech companies to help assist in the creation and implementation of blockchain based systems. Bank of America and JP Morgan Chase are just two of the major banks to partner with tech companies to develop blockchain-based systems. As an efficient alternative to traditional banking methods, blockchain can play a critical role in the future of banking technology.