Blockchain is first and foremost used in the Financial sector. It’s the technology underpinned and hidden behind the creation of Bitcoin, a cryptocurrency. Blockchain is an open-source and Distributed Ledger Technology(DLT) that secures payment transactions between two parties. To bring it clear, Blockchain records or stores the origin, movement, and transaction of any value immutably. It eliminates central authority to process transactions instead all the transactions are approved by the nodes in the network. Blockchain is decentralized so all the transactions recorded in the digital ledger are shared across the network. The transactions are really fast and the histories can’t be altered.
These days, transferring money to another country takes more days and involves many third parties to process the transactions. The third parties may have taken their part of some money. So the receiver can't spend the entire money. Blockchain can faster international transactions and monetary transactions and it’s more cost-effective. It doesn’t include any third parties, only the sender and receiver. The transactions are visible and also secure.
Blockchain eliminates fraud as it includes audit trials. It’s impossible to tamper or alter the information once it is uploaded to the blockchain network. As there is no central server, it becomes difficult for attackers to target. Even if he hacked a node in the network and tried to alter information, he had to change the information in all other nodes also. He isn't aware of how many nodes participated in the network, and as a result, it’s difficult to information fraud.
Blockchain can reduce the cost of banks and also improve product quality. Financial institutions are seeking to implement Blockchain to solve their problems in cost and speed. Tasks can be automated using smart contracts in blockchain. It’s secure, transparent, and easy to implement. So it makes it possible to automate activities related to banking services. The human errors are reduced with the automated transaction recording process with blockchain.
Loan or Lending is one of the significant aspects of banking. It’s helpful for both corporate and consumers to gain money and use it for various purposes. Lending is the mainstream income for banks. Blockchain implementation in banking will facilitate the lending process and instant settlement of transactions. This helps banks to reduce the time taken to open bank accounts from days to minutes.
It encourages transactions between parties that are trading directly but not including third parties like banks and stock exchanges. The share price could suffer so it’s not possible for a complete elimination of banks. They have roles in providing liquidity and security to blockchain-based financial systems. But the fees paid extra for brokers will disappear soon.
In a nutshell, blockchain can provide the next level of security to the banking sector. It makes a huge impact on international transactions and digital assets security.