Says Deltec Bank Bahamas
The cryptocurrency Bitcoin brought blockchain technology into the spotlight. Now, this technology is being utilized in many different industries. This post will look specifically at how the blockchain movement is impacting the financial industry.
What is Blockchain Technology?
According to Deltec Bank, Bahamas- “Blockchain technology uses distributed databases and cryptography for the purpose of recording transactions. These records are interlinked and part of a continually expanding system that acts as a decentralized ledger.”
Don and Alex Tapscott, authors of Blockchain Revolution, describe the technology as “an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.”
Because there is no central authority and the ledger must be shared, the blockchain network is more transparent. Everyone who is part of the network must act responsibly, which greatly increases its security. Any nefarious actions would be spotted and halted.
How the Blockchain Movement is Affecting Banking
Blockchain technology has the potential to disrupt the banking system as we currently know it. Created for cryptocurrencies, blockchain will very likely replace traditional systems used for carrying out financial transactions.
Banks are starting to realize that changes to the payment system are imminent. These banks fear that avoiding the use of blockchain technology would end their existence. Thus, the need to embrace the blockchain movement has become apparent.
According to Hackernoon, some banks are already implementing the technology. A few examples include:
- The Bank of New York Mellon’s use of blockchain technology to accelerate the bond settlement process.
- Banco Santander taking advantage of blockchain for its ability to facilitate immediate cross-border transactions.
Banks that follow these examples and find ways to implement blockchain technology into their own systems will be ready to face the upcoming changes in the financial industry.
How the Blockchain Movement Impacts Banks
The blockchain movement is going to revolutionize banking. Here is a little sneak peek that will help you know what to expect.
Greater transparency leads to greater security. In addition, faster transactions do not provide enough time for invaders to interfere with those transactions.
According to Asia Blockchain Review, this technology will save banks about, “$15-20 billion in infrastructure cost alone by 2022.” This reduction in cost is due in part to smart contracts that result in fewer interactions with go-betweens.
Instead of the typical 1-3 days required to verify and complete traditional transfers, blockchain technology expedites the process so that transfers can be verified in a matter of minutes. This will increase customer satisfaction with banking services.
Current banking systems allow data to reside in multiple locations. That information can be altered in one or more of the institutions where the data is being stored. This may result in outdated information.
Blockchain technology provides a solution. Stored data can only be obtained and modified when certain rules have been followed, maintaining the integrity of the data.
It is obvious that the blockchain movement will have a major impact on banks, which is why innovative banks are preparing for the future right now.
These banks are implementing blockchain technology in order to survive the upcoming changes in the financial industry. It will also help them to stand out from competitors and increase consumer satisfaction.
Disclaimer: The author of this text, Robin Trehan, has an Undergraduate degree in economics, Masters in international business and finance and MBA in electronic business. Trehan is Senior VP at Deltec International www.deltecbank.com. The views, thoughts, and opinions expressed in this text are solely the views of the author, and not necessarily reflecting the views of Deltec International Group, its subsidiaries and/or employees.
About Deltec Bank
Headquartered in The Bahamas, Deltec is an independent financial services group that delivers bespoke solutions to meet clients’ unique needs. The Deltec group of companies includes Deltec Bank & Trust Limited, Deltec Fund Services Limited, and Deltec Investment Advisers Limited, Deltec Securities Ltd. and Long Cay Captive Management.