The banking industry is not just the most important, but also the most vulnerable industry globally. The need for security is increasing, as there is just too much at stake, and the need to keep it safe is high. Apart from this, consumers tend to consume the banking app and other banking products using the mobile phones, which has made it impossible to keep a check on the products and how fulfilling they are.
While you want to capitalize on the provisions of the banking products, you also want to keep the infrastructure requirements and other needs of the industry under check. Blockchain is the answer to maintain infrastructure security and keep up with the product security and consumer’s needs for privacy in data exchange.
It is still in the nascent stage but it is definitely a growing technology one that will enhance the experiences and maintain the security needs of the industry.
Is there a need for decentralized payments or secure methods of banking?
In the case of financial companies, there is a growing need for third party banking, which means the data may or may not be reliable.
Real-time payments have become an essential which calls for security and needs an assurance that the payment can be facilitated irrespective of the location.
With Blockchain, the payments happen in a peer-to-peer network. The technology can be used to manage monetary systems in various defined manners. You can use the technology for contract executions and payments as well as third party transactions.
In this blog, you will learn 5 aspects how blockchain is transforming the way banking apps work.
1. Facilitates Efficient Money Transfer
In the Internet dominated era, it has become essential for money to be transferred not just within the country, but also from one country to another. Banks need to facilitate this transfer of currency, along with exchange of this currency. It is especially true for companies operating in different countries and time zones. There is a lot of money being transferred, which can raise major security concerns.
However, if you use Blockchain technology at the core of banking, you may not face these issues. This technology will help improve the transactions, and make it less expensive. This method makes the whole idea less cumbersome.
With cryptocurrency, you get an alternative mode of payments, which helps boost the security and ensures that all suppliers within the network are taken care of.
With the crypto-based currency transfers, there is less time involved and the customers tend to profit from this exchange. The cost of this transaction is also less compared to the other methods. So, it is time companies adopt Blockchain-based transfers instead of the regular digital transfers, to save money and time, and make the whole process hassle-free.
2. Immediate Fraud Detection for Increased Security
One of the major issues facing the consumers of the finance app industry and the people within the banking network is fraud. Cyber Crime seems to be prevalent in this industry majorly, leading to most people refraining from digital and convenient mode of transactions.
However, Blockchain can ease these issues out, and make payments more secure and the overall industry safe for the future.
The main reason why frauds occur and the banking security is becoming an issue could be attributed to the fact that the banking system works on a centralized database. This makes the system vulnerable and gives complete access to the criminals.
However, with Blockchain, your system is introduced to a decentralized system that works with a timestamp. So, even a small manipulation made to the system will be recorded with the time, which will make sure that criminals stay away from the system. In fact, you cannot change a single block; every change made will affect all the blocks involved.
3. Record KYC with Ease & Increase Security
Banking customers share a lot of data with the banks, which is vulnerable and at risk in the centralized system. Know Your Customer is essential given the current regulations where the bank needs to know every detail of the customer. However, keeping the data safe can be a bigger concern, which is why most of the people don’t share their details with everyone. This can restrict the movement of trade and transactions. That’s precisely why the banking industry should consider blockchain.
It will not only verify the data that has been submitted to the bank, but also ensure that the data is not shared with anyone unless they have the permission to receive the data by the customer. The verification process is easy and hassle-free in case of blockchain. In fact, you wont need to get the customer to perform the KYC again and again. The data would be located in one place, and with permission the different banking and financial institutions can access the data.
4. Smart Contracts and Fewer Hassles
Whenever a user enters into an agreement with a third party, they sign contracts. This involves numerous intermediaries. Not only is there a chance of losing the data and other required documentation, but also the hassle of involving so many people and ensuring data safety at the same time. It will also increase the transaction cost.
However, with smart contracts that are blockchain enabled, you won’t be facing these issues. From exchanging money to making transactions, every contract is digitally enabled and secured within a block. No manipulation or access without permission is possible. in fact, these smart contracts allow users to get rid of brokers and other intermediaries that were responsible for contracts in the earlier times, thus ensuring quicker and efficient systems in place.
5. Reduce Need for Storage Locations
Banks deal with multiple products which call for multiple data and consumer inclusions. However, this duplication of data and multiplicity of the transactions cannot be easily handled, which is why you need to have proper storage locations.
Blockchain facilitates single storage location for all the data and transactions. All your products are saved within a single location, thus making it easier for you to handle the data and ensure consumer satisfaction with a good experience.
The overall efficiency of data management and handling is also increased with blockchain at the core.
Apart from this, blockchain is also used for the following
To reduce the volatility of crypto currencies and digital payments in the banking industry and make it more reliable
For better and easier identity management, so that a single person does not end up using multiple identities and having too many accounts or data within the bank
Blockchain is all about the network, and so when you are implementing Blockchain within your bank you need to take care of a few things.
You should ensure that the network defines the rights, obligations and even the controls and standards for the transactions.
The seamlessness of the on-boarding process will determine the effectiveness of blockchain and the networks for your bank or financial institution.
There are different ways to adopt Blockchain for your bank or financial institution. Before going ahead with blockchain, you need to prepare a roadmap and have a plan defined for adoption and use of this technology. You should also define the purpose of introducing this new technology.
When you think blockchain, make sure you also include current technologies such as IoT and AI in combination with it for better and efficient systems and management of transactions.
Yuvrajsinh is a Marketing Manager at Space-O Technologies, a blockchain solution and app development company. Apart from that, he is very active on LinkedIn, with 145k+ followers. He has helped over 250 job seekers last year to find their job.