Blockchain Technology Empowers Banks to Evolve
Blockchain technology can empower any financial institution to be more efficient as it evolves into the future. Linking a transaction to a database entry with a chain and then making blocks of that data allows higher-level processing without interfering with regulatory-mandated security protocols. This is a major advantage for financial institutions focused on increasing transaction speed while keeping funds secure.
Through blockchain, banks can increase speed, lower transaction processing costs and enhance their ability to keep money safe during transactions. However, Business Insider notes that blockchain offers an underlying technology, not a direct financial instrument. Merely using blockchain methods will not assure that all risks are mediated. Cryptography, for example, is still essential in order to protect data both in motion and at rest, notes Security Intelligence. In addition, encryption remains a must as a way to directly protect transaction confidentiality, an essential part of any bank’s security strategy.
Blockchain technology offers the benefit of making verification automatic and integrating it into the transaction process. This ability alone can eliminate the need for an additional processing layer. This advancement is great for banks, which can always use one less layer to deal with in transactions.
Tapping Into the Full Power of Blockchain Technology
To take full advantage of blockchain, banks must get it working at scale. That’s why cooperative efforts like the HyperLedger Project have emerged. Enterprises want to see blockchain work in the real world, for real use cases. Being able to process a value transaction in minutes rather than days is useful only if it can be done reliably and repeatedly.
The blockchain method can also make it easier for banks to generate regulatory compliance information. By streamlining processes, the data needed to plug into forms can become more obvious and accessible in a reporting situation.
“The elegance of the blockchain is that it obviates the need for a central authority to verify trust and the transfer of value,” experts Mohit Kaushal and Sheel Tyle write for Brookings. Because this practice is not the current way of doing things, blockchain will inevitably cause some disruptions. For example, third-party transaction verifiers like auditors, legal services, payment processors and brokerages will be removed from the transaction resolution loop to improve speed.
Banks are engaging in blockchain projects to create new business models that are applicable to a new era of electronic cryptocurrency characterized by quicker transaction resolution times. Financial institutions simply don’t want to be bypassed by tech guys in five years. Through blockchain technology, banks can better aim to drive business into the future.