Technology has gone through an epic evolution over the years to impart the living conditions of human lives in different ways. Compared to the 70’s we’ll realize that technology has progressed with the inventions and deployment of technological advancements like the VR, 4G networks, the new sources of power and so much more.
It’s no surprise that financial organizations like banks have followed suit too. The banking industry will always want to find ways to make banking convenient for both the company and its customers and that’s where these technological advancements come into light.
The Introduction of Blockchain Technology in Banking
Banks have started to change their perception of this technology, and now see it as an important improvement to their banking system. Based on how fast this technology has developed over the years. Blockchain was initially used for Bitcoin, which later thrived and developed into a series of applications like smart contracts.
Concerns remain about the blockchain technology in terms of interoperability, scalability, and regulations. However, more pilot tests are been carried out by various banking institutions to solve these niggling issues.
At the same time, more countries are now providing regulations that will guide the blockchain space, eliminating the issue of what is allowed and what is not. Blockchain technology is bound to change the face of the banking industry, and we will look at some of those areas that will be transformed.
Deposits and Account Balances
The main function of the bank is to help you hold your money in accounts of your choosing. However, your deposits don’t just sit in your account, they are loaned out through fractional reserve banking. Therefore, that account balance you see in your bank account is not actually with the bank. That is a lack of transparency, which is something blockchain technology knows how to deal with quite well.
The use of blockchain technology as the ledger for accounting entries that reflect your account balance will ensure improved efficiency. The blockchain will make customers’ deposits and account balance more transparent, secure, cheaper and accessible.
Payments and Transactions
Transactions and payments have long dominated the blockchain space in the form of cryptocurrencies like bitcoin, etc. These cryptos represent e-currency that can be used for payment anywhere in the world. This system of payment can be transferred to the banking sector.
Blockchain transactions are known for their privacy, security, and cheaper processing fee. This compares with their traditional compatriots like Remita, Western Union, etc.
The financial sector already has a practical example of a blockchain-based payment platform in the form of Ripple. Ripple is already connecting banks with payment providers. In 2020, we could see banks adopt this technology in their payment infrastructure.
Fighting Identity Fraud
The process of proving customers’ identity has been for years cumbersome and sometimes frustrating and costly for banks. All that could change with the blockchain cryptographic capabilities. Its secured network and constant data sharing ability with all concerned parties. This means there is little to no room for identity fraud.
The banking industry is a customer-focused business. As such must always look for ways to deliver better service to its customers. These technologies could be a game-changer for the banking system to keep in touch and updated with the modern age.