How Banks Should be Using Blockchain
Blockchain is no longer just for cryptocurrency. Businesses of all types can enjoy its benefits, and banks are quickly adopting the technology to reach new markets, reduce transaction times, and become more efficient. Let’s examine different ways banks can use blockchain’s speed and security to enhance their businesses, as well as their customers’ experiences.
Domestic and international trade transactions are typically manual, process-oriented, and detail-heavy. Assembling certain documents, like corporate trade financing letters of credit, means multiple, paper-based steps. Losing details in the cracks is a looming danger, and the process is laborious. This can make financing especially difficult for the roughly half of smaller enterprise businesses without credit.
“Smart” contracts built on blockchain allow parties to securely and automatically store, and quickly exchange, contract details in real-time. Streamlining coordination and processes means easier, safer, frictionless transactions between small enterprises, while the encrypted blockchain ledger tracks every transaction detail, permanently.
Privacy and Safety
Customers demand protection from identity theft – but not at the expense of a compromised user experience. Everyday banking practices, from opening a new account to transferring clients’ information between banks, requires strict identity confirmation, but repeated requests for identifying information means transaction delays, and potentially-annoyed clients.
Blockchain consolidates and stores all client identification, while not storing the actual information itself. Consumers can prove their identity through a thorough, initial verification process with their bank, and using managed access, choose to share (or not share) that information with other parties. The security and trust engendered by blockchain mean companies can approve this pre-verified information quickly and easily, leading to increased convenience for customers, and a better overall experience.
Digital payments are popular and increasingly safe, but sending money between individuals, especially internationally, remains an imperfect process. Exchange rates, border crossings, and varied institutions with different internal processes means delays as details are reconciled – not to mention high costs in the event of a dispute. Above all, it can be difficult to fully trust the parties involved when transacting in new or unfamiliar territories.
Blockchain imbues the transaction process with a measure of certainty for everyone involved. Each party can view the single, immutable ledger as it is updated – there is no confusion or forgotten details, as transactions are completed in real-time. The premium placed on security means lower risk for participants, and removal of inefficiencies allows for lower-cost, higher-volume transactions.
The future is bright for blockchain in the financial sector. Banks are rapidly discovering its benefits as they implement it to reduce inefficiencies, speed transaction times, engage with new markets, and provide a better, more-secure customer experience. These use cases appear to be the tip of the iceberg for blockchain in banking…and beyond.
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