There is plenty of buzz about blockchain in the banking industry. Does this technology have the power to change the way we create transactions in the future?
Although there are speed and security benefits to consider when looking at the blockchain revolution in this sector, it is the efficiency that this technology offers that is the most significant advantage. When global trade activities become more efficient, the entire communities can benefit from the savings that occur.
Several positive impacts are possible in the near future with blockchain that could change how everyone sees financial institutions in the future.
How Blockchain Works in the Banking Industry
Think about the big ledgers that companies used to keep before we moved data to computers. These books were useful in the recording of transactions to create an official public record that could be inspected to determine the validity of each interaction.
Blockchain is like an online version of those old leather-bound books. The difference is that the data it contains is instantly accessible by multiple individuals or parties. It is accurate, secure, and updated in real-time to increase the speed and efficiency of each transaction.
This digital ledger has sharing capability over a computer network without the need for a centralized authority.
If a user wants to send money to someone else, then this transaction would receive online representation as a block. That means it would become a token or coin in the database, which is how Bitcoin was born.
Then this block gets broadcast to every party in that network. Those who are there will approve the transaction, validating it so that the coin or token is added to a chain.
Then the transaction can finalize, moving value from the first user to the recipient. It is through this process that banks can enjoy an entirely transparent record of transactions.
What Are the Benefits of Blockchain in Banking?
There is a diverse range of benefits that the banking industry would experience with a full adaptation of blockchain tech.
Companies operating in this space would gain almost instant global access to funds. It could happen anywhere and at any time, creating an industry where cash is always in continual motion. This process would help every company meet its liquidity or working capital needs more efficiently.
Money would literally move at the speed of information when banks can fully adopt blockchain into their industry. Instead of being a disruption to this sector, it enables companies to do more with their resources.
Banks could experience real-time settlement capabilities with blockchain too. This benefit would reduce the risks of counterparty activities while enhancing automation opportunity to reduce overhead costs.
Blockchain offers a lot of promise for the banking industry. This technology revolution could increase the speed of business in numerous, dynamic ways to create more global trading opportunities. While these advantages take place, communities will have the chance to connect together on a worldwide scale for the first time in a way that is irrefutably secure.
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.