Blockchain Development & The Future Of Banking
Blockchain Development & The Future Of Banking
February 14, 2023 | Editor Choice
3 min read 
Admin
Table of Contents
Let’s understand why the finance industry needs transformation!
Challenges of Present Day Banking Infrastructure
Banks are operational for centuries and have acted as facilitators to various financial and economic activities nationally as well as internationally. Its everyday activities include trading, lending, investments, payment processing, transaction settlements, insurance, etc. Traditional banking procedures appear to be very cumbersome and time-consuming if evaluated in light of today’s digital progress. With each passing day, we witness advancements in the banking and finance sector where offline processes are replaced with digital solutions that ultimately make the life of consumers as well as administrators substantially easy.
Legacy banking systems are manual, have serious security vulnerabilities in underlying operational architecture, and have expensive processes. The time now is to leverage the power of technological frameworks and transform traditional banking methods with advanced, secure, and efficient ones.
What is Blockchain as a Service? Working and Profitability for Businesses
Decentralized Ledger Technology (DLT) to Replace Legacy Banking Systems
Banking institutions worldwide have taken several moves towards digitized business models. If we talk about the adoption of blockchain technology, below are blockchain use cases in the banking industry.
Payment Processing
Cryptocurrencies such as Ethereum and Bitcoin are built on public blockchain networks, meaning you can send and receive money faster and securely. Public blockchains do not involve any intermediaries or central banks to process the payments. Instead, they make use of smart contracts that refer to the computer programs in which all checks and conditions are embedded to automate the operational workflow.
Other than just C2B, cross-border B2B transactions generated $175 Billion in revenue in 2020. Nigeria, Keyna, and Uganda are also using the B2B payment processing platform, BitPesa built on blockchain technology. The company has processed millions of dollars of transactions and is growing 20% every month. Payment processing through a decentralized ledger benefits consumers by facilitating faster payments at very lower fees.
How Blockchain Hyperledger Works & Helps In Business Transformation
Clearance and Settlements
Traditional banking systems involve several intermediaries and central authorities due to which an average bank transfer takes up to 3 days to settle. A typical bank transfer passes through a complex system of central banks to custodial services. Moreover, it introduces logistical problems to track and manage the record. This is where blockchain comes into play. Blockchain’s decentralized nature eliminates third parties from the system and transparently keeps track of transactions.
Fundraising
Fundraising is a tedious process. Entrepreneurs sit together in countless meetings, identify the equity and valuation of assets, and risk assessments to avoid unfavorable circumstances. In contrast, blockchain technology brings Initial Coin Offerings (ICOs) to help companies raise funds. Bitcoin and Ethereum blockchains have already implemented several ICOs that identify the asset valuation and liquidity to avoid future risks.
In the past few years, some high-profile ICOs have raised hundreds of millions and even billions of dollars. ICOs are sufficiently regulated as regulatory authorities are progressively applying existing financial market regulations and securities to ICOs.
Customer KYC & Fraud Prevention
Know Your Customer (KYC) and Anti-Money Laundering (AML) verifications are core operations in the finance industry. The processes are implemented to prevent fraud in the ecosystem. The individuals/participants are verified against certain identity checks to make sure that he/she has a clear criminal record. Moreover, it allows for building an honest and legal community.
Blockchain technology in the banking sector has streamlined customer KYC processes to a significant extent. The customer information is stored on a network that can be easily accessed and verified.
Transform your Business Seamlessly with InvoBlox’s Blockchain Development Services
Securities
Banking institutions keep track of customer data such as their debts, loans, and commodities. They connect with brokers, custodial banks, exchanges, clearing houses, etc. Data flow from one party to the other makes the overall process highly inefficient and slow. Moreover, they are highly prone to fraud and inaccuracy. Blockchain in the banking industry manages digital assets and transfers tokens while reducing exchange fees.
Loans and Credits
Banks make use of credit reporting systems to keep track of loans and credit data. One of the blockchain applications in banking offers a decentralized way to process peer-to-peer loans. Before processing loan requests from consumers, banks undergo strict verification processes to authenticate the customer's identity and identify the risks. For this, they look at the credit score of the customers, their ownership status, and their debt-to-income ratio. Blockchain stores all the user information and payment history to process loans and credits faster.
Hire Blockchain Developers: Everything You Need to Know
Significance of Fintech Software Development Using Blockchain
Three major components that make blockchain technology stand out in this Fintech space are:
Transparency
Blockchain technology offers enhanced transparency between market participants. Its architecture keeps an updated copy of users’ transactions and a record of activity that all market participants can easily access in real time.
Decentralization
Blockchain is a distributed ledger technology that eliminates the need for central authorities, third parties, or intermediaries to evaluate or process transactions. It offers immutability and transaction interoperability and reinforces trust in the ecosystem. Data once stored on the blockchain network cannot be altered.
Security
Blockchain technology maintains an immutable record of transactions and implements asset ownership. This significantly mitigates the risks of unauthorized access, data breach, or identity theft. Moreover, it employs a strong cryptographic security mechanism to encrypt the data with hash functions. No unverified entity can access the data or become part of the blockchain network.
How Blockchain Makes Sense for the Future of Banking?
Banking and finance institutions, insurance companies, and investment firms are pillars that sustain the economy of the world. Generally, other cutting-edge technologies have very less impact on the banking industry but the blockchain is an exception. In the near future, it brings countless opportunities more than just digital currencies. It has the potential to transform certain operational areas such as ownership rights, physical or digital asset management, document provenance, and security implementations.
Other than this, the future of banking can facilitate peer-to-peer transactions, international blockchain payments for the banking industry, identity verification processes, shared trading, transaction monitoring, credit report, and crowdfunding.
How Blockchain is Improving the Circle of Supply Chain Management
Conclusion
After a deep analysis, we conclude the inevitable benefits of blockchain for the banking industry. From expediting transaction processes to reduced transaction costs, easy trading, and most importantly, stringent security implementations truly declare the future of banking. InvoBlox acknowledges the potential and scope that blockchain technology can bring to your industry and therefore, brings a full suite of Fintech development services that align with your industry needs.
We are all ears to your business case - Take advantage of our dedicated blockchain teams and hire Fintech developers to transform your organization into an end-to-end blockchain ecosystem. Our multifaceted approach helps you integrate new-gen tools and technologies into your finance domain.
Table of Contents
Let’s understand why the finance industry needs transformation!
Challenges of Present Day Banking Infrastructure
Banks are operational for centuries and have acted as facilitators to various financial and economic activities nationally as well as internationally. Its everyday activities include trading, lending, investments, payment processing, transaction settlements, insurance, etc. Traditional banking procedures appear to be very cumbersome and time-consuming if evaluated in light of today’s digital progress. With each passing day, we witness advancements in the banking and finance sector where offline processes are replaced with digital solutions that ultimately make the life of consumers as well as administrators substantially easy.
Legacy banking systems are manual, have serious security vulnerabilities in underlying operational architecture, and have expensive processes. The time now is to leverage the power of technological frameworks and transform traditional banking methods with advanced, secure, and efficient ones.
What is Blockchain as a Service? Working and Profitability for Businesses
Decentralized Ledger Technology (DLT) to Replace Legacy Banking Systems
Banking institutions worldwide have taken several moves towards digitized business models. If we talk about the adoption of blockchain technology, below are blockchain use cases in the banking industry.
Payment Processing
Cryptocurrencies such as Ethereum and Bitcoin are built on public blockchain networks, meaning you can send and receive money faster and securely. Public blockchains do not involve any intermediaries or central banks to process the payments. Instead, they make use of smart contracts that refer to the computer programs in which all checks and conditions are embedded to automate the operational workflow.
Other than just C2B, cross-border B2B transactions generated $175 Billion in revenue in 2020. Nigeria, Keyna, and Uganda are also using the B2B payment processing platform, BitPesa built on blockchain technology. The company has processed millions of dollars of transactions and is growing 20% every month. Payment processing through a decentralized ledger benefits consumers by facilitating faster payments at very lower fees.
How Blockchain Hyperledger Works & Helps In Business Transformation
Clearance and Settlements
Traditional banking systems involve several intermediaries and central authorities due to which an average bank transfer takes up to 3 days to settle. A typical bank transfer passes through a complex system of central banks to custodial services. Moreover, it introduces logistical problems to track and manage the record. This is where blockchain comes into play. Blockchain’s decentralized nature eliminates third parties from the system and transparently keeps track of transactions.
Fundraising
Fundraising is a tedious process. Entrepreneurs sit together in countless meetings, identify the equity and valuation of assets, and risk assessments to avoid unfavorable circumstances. In contrast, blockchain technology brings Initial Coin Offerings (ICOs) to help companies raise funds. Bitcoin and Ethereum blockchains have already implemented several ICOs that identify the asset valuation and liquidity to avoid future risks.
In the past few years, some high-profile ICOs have raised hundreds of millions and even billions of dollars. ICOs are sufficiently regulated as regulatory authorities are progressively applying existing financial market regulations and securities to ICOs.
Customer KYC & Fraud Prevention
Know Your Customer (KYC) and Anti-Money Laundering (AML) verifications are core operations in the finance industry. The processes are implemented to prevent fraud in the ecosystem. The individuals/participants are verified against certain identity checks to make sure that he/she has a clear criminal record. Moreover, it allows for building an honest and legal community.
Blockchain technology in the banking sector has streamlined customer KYC processes to a significant extent. The customer information is stored on a network that can be easily accessed and verified.
Transform your Business Seamlessly with InvoBlox’s Blockchain Development Services
Securities
Banking institutions keep track of customer data such as their debts, loans, and commodities. They connect with brokers, custodial banks, exchanges, clearing houses, etc. Data flow from one party to the other makes the overall process highly inefficient and slow. Moreover, they are highly prone to fraud and inaccuracy. Blockchain in the banking industry manages digital assets and transfers tokens while reducing exchange fees.
Loans and Credits
Banks make use of credit reporting systems to keep track of loans and credit data. One of the blockchain applications in banking offers a decentralized way to process peer-to-peer loans. Before processing loan requests from consumers, banks undergo strict verification processes to authenticate the customer's identity and identify the risks. For this, they look at the credit score of the customers, their ownership status, and their debt-to-income ratio. Blockchain stores all the user information and payment history to process loans and credits faster.
Hire Blockchain Developers: Everything You Need to Know
Significance of Fintech Software Development Using Blockchain
Three major components that make blockchain technology stand out in this Fintech space are:
Transparency
Blockchain technology offers enhanced transparency between market participants. Its architecture keeps an updated copy of users’ transactions and a record of activity that all market participants can easily access in real time.
Decentralization
Blockchain is a distributed ledger technology that eliminates the need for central authorities, third parties, or intermediaries to evaluate or process transactions. It offers immutability and transaction interoperability and reinforces trust in the ecosystem. Data once stored on the blockchain network cannot be altered.
Security
Blockchain technology maintains an immutable record of transactions and implements asset ownership. This significantly mitigates the risks of unauthorized access, data breach, or identity theft. Moreover, it employs a strong cryptographic security mechanism to encrypt the data with hash functions. No unverified entity can access the data or become part of the blockchain network.
How Blockchain Makes Sense for the Future of Banking?
Banking and finance institutions, insurance companies, and investment firms are pillars that sustain the economy of the world. Generally, other cutting-edge technologies have very less impact on the banking industry but the blockchain is an exception. In the near future, it brings countless opportunities more than just digital currencies. It has the potential to transform certain operational areas such as ownership rights, physical or digital asset management, document provenance, and security implementations.
Other than this, the future of banking can facilitate peer-to-peer transactions, international blockchain payments for the banking industry, identity verification processes, shared trading, transaction monitoring, credit report, and crowdfunding.
How Blockchain is Improving the Circle of Supply Chain Management
Conclusion
After a deep analysis, we conclude the inevitable benefits of blockchain for the banking industry. From expediting transaction processes to reduced transaction costs, easy trading, and most importantly, stringent security implementations truly declare the future of banking. InvoBlox acknowledges the potential and scope that blockchain technology can bring to your industry and therefore, brings a full suite of Fintech development services that align with your industry needs.
We are all ears to your business case - Take advantage of our dedicated blockchain teams and hire Fintech developers to transform your organization into an end-to-end blockchain ecosystem. Our multifaceted approach helps you integrate new-gen tools and technologies into your finance domain.
