How Blockchain Technology could affect the Financial Industry

by Josh Wardini

The blockchain technology may be relatively young, but its potential for revolutionizing multiple industries is already being felt. Even at its infancy, blockchain has already found applications across multiple fields, including the banking sector. Why not? The tech’s first application to receive mainstream attention was digital currency.

In the banking industry, however, blockchain technology could do much more than just replace paper money. According to the infographic below, 90% of major North American and European banks are exploring blockchain solutions. The bank infrastructure could be cut down by 30% through the technology, and the headcount could be reduced by about 10%, which could translate to $160 million annually in cost-saving.

In a recent study by PwC where 544 C-suite executives were interviewed, 95% of the respondents were of the opinion that their businesses could be improved by adopting blockchain solutions.

These facts come as no surprise when you consider what the tech brings to the table – security, trust, faster transactions, cost reduction, and better record keeping.

The existing databases used by most banks are centralized, which means that financial activities such as stock exchanges and money transfer services are potentially vulnerable to hacking. This is because a hacker attempting to get into such a system may only has one database to attack.

Through distributed ledger technology, however, blockchain could beef up security by storing the same information across multiple nodes on the network and using cryptographic technology.

The decentralized nature of the system also means that there would be close to instantaneous transactions with lower fees. So far, smaller blockchains process transactions almost instantly while larger ones, such as Bitcoin and Ethereum, take around 5-120 minutes. Either way, it beats having to reportedly wait up to three days for your bank to move the money.

Another way that blockchain could benefit the financial industry is through a universal customer identification system and KYC processes that could be easy to access and update from a distributed ledger. It is estimated that financial institutions spend about $500 million on these processes. If such costs were reduced, so would be the cost of performing transactions.

Read more of the infographic here: https://bitfortune.net/blockchain-disruptions-infographic/