Can Blockchain Be Used by Banks?

The high interest in blockchain and cryptocurrency has impacted financial institutions. Currently, the influence of these new technologies on the banking system is being actively studied.

At the moment, we can confidently assert that the use of blockchain in the banking sector will help open new perspectives in developing financial transaction protection and increase their speed. Bankers from different countries are very involved in implementing these technologies in their services.

It is worth remembering the idea of blockchain itself, which was created as a distributed registry of data storage, clearly did not involve any third-party control over transactions within the system or the use of financial intermediaries.

Against this backdrop, many financial institutions’ fears of technology are understandable, based on the fear of losing control of their businesses.

How can blockchain be adapted in banks?

In fact, banks can incorporate the new technology into a range of services:

  • clearing and securities trading;
  • consulting and provision of reference data;
  • customer identification;
  • processing of cross-border and retail payments;

Customer identification in banks using blockchain

There are many vital procedures in banking, but one of the most significant is considered to be identity verification. This procedure is sometimes difficult because of the large amount of different information stored by individual organizations. Also, there are many forms of storing and providing information so that all interested organizations can use it for its intended purpose.

If blockchain is used for identification in banks, it will be possible to make this procedure more accessible, and the approach will be universal. Ideally, each client’s data in a unified form will be in a single registry, which all banks can view. Of course, it will not be possible to change the registry arbitrarily, and the data itself will be available to all users simultaneously.

Such an implementation will have different parties:

  • Customers will be able to get answers to credit requests.
  • Banking services will be provided faster and more thoroughly.
  • The time spent on transactions will be reduced.

In the near future, every bank customer will be able to prove their identity with their presence. Blockchain development will naturally help with this, asking for your data as you walk up to the right specialist.

Using blockchain for international transfers and payments

Internal and external transfers of customer funds are a major part of any bank’s operations. By incorporating blockchain into this area, you can provide your customers with a different service level.

How a transfer system is built: it always involves beneficiary and sender banks. Sometimes banks also use intermediate accounts, which slows down the processing speed and increases the cost of the service.

The world’s leading payment systems are already testing the introduction of blockchain in international transfers. It will track funds at every stage and make payments transparent. Ideally, participants in the system, whether two banks or a payment system and a bank, will be able to exchange cash payments instantly.

–°ryptocurrencies in commercial banks

Touching on the topic of blockchain use in banks, one can’t help but mention cryptocurrencies. As soon as an alternative medium for exchanges and payments that is not under the control of any government agency appeared, financiers remembered the days when commercial banks used to issue their own private money. And if that existed before, why shouldn’t cryptocurrencies be used now?

Here we can give the example of the cryptocurrency Ripple, one of the leaders in capitalization. Its main area of use is interbank transfers. The world’s largest financial institutions already use it in their settlements. Blockchain technology for banks is constantly emerging. But it should be noted that the banking system is not only changing under the influence of blockchain and cryptocurrencies but also changing its own development. Banking capital is the primary driving mechanism, as investors continue to enter these technologies through it, allowing for constant development and new blockchain perspectives.

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