I. An Introspect:
The big daddy of debate is making a lot noise now. Any Guesses? Well it’s nothing but the “Blockchain Technology and its impact on the core Backbone of any Economy viz Banking Sector”. Blockchain Technology is the modern era revolution that’s in trend now a days. Satoshi Nakamoto’s Brainchild- Blockchain Technology has lot of potential to adept a new way of performing financial services thus revolutionizing banking industry-backbone of strong economies.
Although Blockchain technology is still naive, but its cryptographic decentralized secure ledger system has found many positives especially in the core banking and financial sectors. Financial Analysts and few banks like UK’s Santander Bank, UBS Bank, Unicredit, National Bank of Abu Dhabi have already implemented use of this technology for strengthening their business as well to maximize business profits and have a surplus International currency.
Key Impact Areas in Banking and Financial Sectors:
This area will ponder upon the
- Key opportunities/positive outcome the world of Blockchain Tech would bring to core Banking-Financial Sectors.
- Negatives and threats associated with Blockchain Technology in Banking arena.
- Conclusions for the future of Banking era with cryptocurrencies and Blockchain
a.Quicker Surveillance and faster accessibility to all transactions: With Blockchain Tech’s end to end point security chain system, there will be reduction in transaction window time and not as the present payment system which at times take more than 24-48 hours. With advanced security system the data stored will be the “Assets to banks” and chances of it getting hacked will be very minimal.
b.Complete Transparency and mitigation of data redundancy:Blockchain Tech’s uniqueness lies in its decentralized series of independent and interconnected Nodes Module which saves the data in a ledger format and thus make sure that there is no compromise on a user’s data. Thus, it ensures optimum transparency to be achieved and no duplication or loss of key information happens. In other words, it means that the data is highly encrypted/secured.
c.Mitigates cyber threats, Frauds thus acting fool proof security system: – The advent of Blockchain tech as next cloud platform and due to its unique module based on Interconnected decentralized yet independent communication channel, it controls the amount of cyber-attacks by cyber sleuths and third-party channels. Thereby instrumental in curbing the
- Scams and Frauds.
- Act as Saving Grace for most banks as every financial year, due to scams and frauds, they loose not just on financial grounds but also the trust of their core group viz the customers, investors etc globally.
- It also encrypts and secure data stored unless in case of centralized module followed till now. Thus, utilizing the optimal security channel to curb data redundancy, illegal mining etc.
d.Effective Cost Cutting tool: Any Financial bigwigs, Banking Arena operates on the policy of “optimizing revenues and balance the effective marginal costs involved”. Since it uses a virtual transaction based on cryptocurrencies it gains huge in roads in minimizing transaction times, gets the better way off the payment gateways, third party communication channels, eliminate middlemen, brokers and brokerage costs involved etc.
e.Effective SMART Arrangement Tool:- The most effective advantage offered by this technology is that it also uses a special coding language used with three major components also known as “SMART” instead of the usual Swift codes generally used in Banking Arena at the moment. These components are a
- Unique ID provision that includes “Hash”.
- This is followed by a digit/number to block, allow transactions.
- Unique key code also known as “SMART Code” to establish parity with the identity verification of individual or firms.
- Thus, it enforces enormous amount of data to be verified, stored in smart blocks in decentralised ledger independent network hubs.
Any Technological advances that has been created till date go through a series of negative aspects that can cause serious threats. Blockchain technology is not an exception. Its now time to look into these negatives and possible implications it can have in near future.
a. Not widely Accepted as of now in Banking Arena:Since most banks specially in Asia, European union etc are still equipped with the traditional transaction system of using currencies and not the cryptocurrencies, its still under infant stages as well is something that’s not yet widely accepted.
b. Fear of Disruption of the traditional Banking process:-Blockchain Technology is a relatively newer and broader concept using cryptocurrencies for any financial transactions. These relative changes affect largely all Banking transactions and hence for inducting this platform, Banks have to stop traditional banking system and adept to Blockchain Banks and cryptocurrencies.
Hence most global banks though are ready to invest in this revolutionary change, the Banking federal law is yet to pass a consortium global accepted policies and banking reforms.
Amidst all speculations that it will disrupt banking sector, security related issues, the Blockchain Technology will firmly stand the ground. Biggest positive vibe is that global banks like Santander Uk, HSBC, Deutche Bank, JP Morgan Chase and Co, Goldman Sachs Inc, Unicredit Bank Italy etc in the R3 Consortium have agreed to lend their support in making it a grand success. Fintech also have started to educate leading Banks and financial institutions to implement this revolutionary mechanism and in due course completely virtualise the Banking and Financial Arena.
Hope Blockchain Technology to come out successfully of the initial struggle phase and change the global scenario.