The Top 3 Uses of Blockchain in Banking
Unless you’ve been living under a rock the past few years, you’ve probably heard about blockchain and how it’ll totally “disrupt” the purportedly tired and grizzled banking industry. That’s good and all but how exactly can banks use blockchain, anyway?
Fintech Network recently published a White Paper covering exactly that and among other things, it highlighted four potential uses for blockchain within traditional banks. Here are three, ranked in no particular order:
Payments. Arguably the most obvious use of blockchain within banking, blockchain-based payment systems “can be used to make payments in real-time globally, with real-time execution, complete transparency, real-time fraud analysis and prevention and also at a reasonable cost.” This is especially appealing to banks given that the current systems – established way back in the 70s and 80s – are slow and cumbersome, and lack the security and transparency of the blockchain.
Fraud reduction. Banks’ traditional centralized databases have become susceptible to cyber-attacks lately, and as Fintech Network points out, adopting blockchain could not only help minimize these attacks, but also provide transparency great enough to shut down fraud: “blockchain is checked at every step of a transaction by independent miners, with all data being open and publicly available, there is a real-time analysis and verification of every bit of data and all information during the transaction. The blockchain ledger can provide a historical record of all documents shared and compliance activities undertaken for each banking customer. Malicious attempts to view or change the data become part of the data itself, making third-party hacks immediately obvious.”
Trading. Existing trading platforms, while absolutely serviceable, do not provide the transparency – and on the flip side, privacy – that blockchain-based trading supplies. As implied earlier, each blockchain transaction has its own virtual seal of authenticity, which in turn can quash double spending and other traditional trading-related issues, thereby elevating client trust. For those trying to keep their trades on the down low meanwhile, the trades “seal” or token itself can be used to protect trade data: “tokenisation, in the form of cryptography, is used to protect the trade data with parties only allowed to access to permissioned information with the correct security key. This should enable the most confidential of transactions, especially financial transactions, to still take place on such a trading platform.”
For a more detailed look at blockchain’s applications in banking, you can read Fintech Network’s White Paper, here.