Deploying Blockchain in the Finance Industry
Every day, financial institutions conduct millions of transactions around the world to process international payments. Much of the time, these payments are underpinned by a mountain of paperwork and manual processes that struggle to keep up with the pace of online transactions.
Long transaction times and additional fees have plagued the finance industry for quite some time. The widespread inefficiency of the current system has resulted in a financial burden for consumers and companies alike. Likewise paperwork processes remain extremely vulnerable to fraud.
As it stands, our finance system is built on outdated and centralized technology which makes it vulnerable to attacks and system failures. It also struggles to keep up with the needs of modern consumers and has been leaving billions of people globally without any access to essential financial tools. However, over the past decade blockchain technology has emerged as a viable alternative. Blockchain offers not just to increase efficiency, but to redefine the finance industry as well.
Blockchain rose to prominence as the distributed ledger technology behind the cryptocurrency Bitcoin. This decentralized ledger has the capacity to record any set of data, whether it refers to money or personal information. Once the data is stored it is sent down the chain cryptographically to other computers in the network and verified.
This means that a user can make payments to another account instantaneously, whilst logging the journey of the transfer. What makes blockchain so disruptive to the finance industry is that consumers and corporations can use it circumnavigate banks and other legacy intermediary institutions.
Leveraging Blockchain in the Finance Industry
Financial institutions across the world such as JPMorgan, Goldman Sachs, and Citigroup are now trying to kick start the process of leveraging blockchain to improve their overall efficiency. Many banks are starting to look at Ripple and XRP tokens as an avenue for deploying blockchain.
Blockchain’s appeal lies in its ability to simplify day-to-day processes and streamline the transaction process. The World Economic Forum identifies that financial institutions can use finance blockchain solutions for operational simplification, regulatory efficiency improvement, counterparty risk reduction, clearing and settlement time reduction, liquidity and capital improvement, and fraud minimization.
Blockchain technology will allow financial institutions to optimize internal processes and improve the standard of service delivered to consumers. Operational simplification will allow banks to track multiple parties and provide automated settlements. Similarly, settlement time reduction will ensure that transactions are carried out at a much higher rate.
In future the use of blockchain technology will result in simplified and leaner financial institutions that are free from the limitations of centralized banking. Blockchain’s distributed ledger will increases the degree of transparency in the industry, and automate most of the payment process as well.
However the widespread use of this decentralized technology will require close collaboration with industry stakeholders, regulators, and other emerging technologies. Before any widespread adoption of blockchain occurs, companies will need to prepare for massive internal disruption.