Although there are still many problems, blockchain has the potential to reduce the cost and labor of finance and banking. According to Deloitte's report, 24% of global financial institutions are familiar with blockchain technology, and North America will be more familiar with these technologies than other places. Considering the wide application of this technology, enterprises are gradually looking for different fields where blockchain can be applied.
Especially in banking and finance, hundreds of funds flow from one end of the world to the other every day. This makes the global financial system one of the industries that benefit from the application of blockchain. Banks and the financial industry need a lot of manpower. If anything goes wrong at this time, it will have a great impact on the financial system. The Global Financial Technology report shows that in 20 17 years, 77% of financial technology institutions hope to use blockchain as a financial production system in 2020.
Application of Blockchain in Banking Industry
For the basic understanding of blockchain technology and operation mode, the real question in your mind may be: Can blockchain really be applied to banking? If so, how can we make the best use of blockchain technology? In addition, the most important thing is, will the blockchain maintain the status quo or move on?
According to the report of Harvard Business School, the blockchain is to the banking industry at this time, just like the Internet is to the media. Blockchain can solve many problems in the banking and financial industries. Blockchain technology has all the characteristics that a reliable technology should have, including financial-related businesses.
Blockchain can provide high security, especially in exchanging data, information and money. At the same time, it also allows users to use a transparent network architecture, with low operating costs and decentralized help. These characteristics will make blockchain a very stable, reliable and popular solution for the banking and financial industries.
Financial institutions need many intermediaries to ensure the safety of funds. However, these intermediaries make the whole industry more expensive. And because there are too many people involved in the whole process, the probability of making mistakes is also increasing. Blockchain technology can ensure the security of transfer, but also can give users a better experience and lower cost.
Cases of Banks Using Blockchain Technology
Although banks and financial institutions were still skeptical about blockchain technology in the early days, the situation has changed now. With the success of blockchain in many fields, the banking industry is looking for new fields and applications of blockchain.
Some big companies, such as JP Morgan, are full of confidence in the future development of blockchain. The headquarters of the US investment bank also began to study and implement blockchain technology. Quorum project is an enterprise distributed ledger and intelligent contract platform, which can support fast transfer and throughput and solve the problems of financial industry and banks. According to the current news, they have issued annuity certificates with different interest rates based on distributed registration institutions.
In addition to these, all major banks in the United States have obtained patent certificates issued by the US Patent Office. The document mentions the deployment of a licensed blockchain to ensure the security of records and to authenticate company and personal data.
The system will allow certified members to obtain data and record all individual members. In addition, the system will use blockchain technology to integrate multiple existing data storage platforms. This secure single network will provide overall efficiency and reduce the number of storage addresses for user data.
Another institution is Goldman Sachs. Goldman Sachs is also actively involved in the research of distributed registration technology. In order to serve the start-ups in the blockchain industry and solve the volatility in digital currency, Goldman Sachs invested in the digital currency project.
The goal of Goldman Sachs Group is to become the leader of digital currency on Wall Street. Setting up their own digital currency transaction can help them manage digital transactions well.
Financial application case of blockchain technology
With the emergence of more application cases, blockchain technology has the potential to change the current financial and banking industries. This technology can change the current banking industry through the following points:
Reduce fraud
Any project involving finance will be fraudulent. In addition, from the most basic financial management model, security is also the most important. More than 40% financial entities and intermediaries, such as stock exchanges, suffer heavy losses every year because of financial theft.
The central database system is used for financial management and operation. However, centralized database is easy to be invaded, and if there is a single point problem, it will form a network attack. Once hackers enter this system, it is easy to steal funds. This will lead to the need for a more secure system, which requires sufficient security guarantees to prevent such attacks.
Because the blockchain is distributed, it is impossible to have a single point of destruction. Every transmission stored in block form will be protected by encryption mechanism, so it is difficult to be attacked.
In addition, all blocks are interconnected. Because of this connection mechanism, if one block is changed, all other blocks in the blockchain will immediately display this change. Therefore, this will help to track this intrusion, and at the same time, it will also make it impossible for hackers to make changes to the whole system. Through a secure blockchain system, we can prevent cyber attacks, now attacks by banks and financial industry.
Customer certification banks and financial institutions are very worried about this, so they must carry out anti-money laundering and KYC to reduce losses. All these processes need a lot of time, and all banks and financial institutions need to carry out all the verification independently.
According to the survey report, this process costs $6 million to $50 million a year. Some customers try their best to reduce money laundering and attacks. At present, banks need to upload customers' KYC data to a centralized registration institution to check the information of old or new customers.
With the application of the blockchain system, the customer authentication of each bank or financial institution can also be used by other banks, and these KYC authentications do not need to be carried out many times.
In other words, through blockchain technology, a lot of repetitive work can be avoided. Moreover, in the near future, all financial institutions will get updated information about customers, which will reduce the cost of administrators and management institutions.
Intelligent assets
When all assets need to be recorded with clear dates and time stamps, trade financing will become very difficult. The global supply chain contains many institutions and individuals, and participants are constantly trading. Files are more complicated. Blockchain can store the records of these intelligent assets in digital form. Intelligent asset system will not only transfer items, but also track the trajectory of items.
The intelligent asset tracking systems of banks and financial institutions are now facing great competition. Banks with rich data can turn these data into customer value through blockchain.
Intelligent contract
The application of smart contracts can prove the importance of banking and finance. Smart contracts are codes that are automatically executed when certain conditions are met.
When financial transfer is used, smart contracts are very helpful to speed up and simplify complex processes. Only when the conditions in the code are met will the contract be executed, ensuring that the transfer information is very accurate. Moreover, because these terms can be seen by everyone, the probability of making mistakes will be much lower.
Trade finance
Trade financing is considered to be one of the most useful applications of blockchain technology in the banking industry. All participants, such as complex transfers, can be recorded in the blockchain network, and traders and banks can enjoy this information through the * * * account book. Once a certain condition is met, the smart contract will automatically run, and the relevant participants can see all the behaviors that have happened.
According to relevant news, some start-ups have successfully transferred transactions based on blockchain. Usually this process takes 7- 10 days, but now it only takes 4 hours. Compared with the current infrastructure, the use of blockchain can greatly reduce the cost of certificates and bills.
Why does the banking industry need a blockchain?
1. At present, the banking system is highly dependent on paper documents and the current system. Now we need a credible and stable system upgrade to prevent any fraud and solve the expansion and security problems. Blockchain technology and decentralized nature can make the banking system have the high-end technology it is looking for.
Banks can't operate independently, and now many transfers are made through intermediaries. Cross-border transfer takes five days and there are many risks. Through the blockchain system, banks can transfer money very quickly without taking any risks. Banks themselves are enough to solve these problems.
3. The world is going digital. The speed of economic development is gradually increasing, and there is no doubt that this speed will be faster. Blockchain technology will make small transfers faster while ensuring lower costs and transfer expansion.
Financial service enterprises other than banks are gradually reforming their own systems through the latest technology, and ensuring the security of the market by providing reliable services and lower rates. Banks and other financial institutions should accept new blockchain technology to ensure the safety of their ecosystems.
The integration of blockchain technology still faces many challenges.
Blockchain technology certainly has its advantages, but it also contains many challenges, especially for financial and banking institutions.
Interactivity: Blockchain technology will not be bound by any international regulations, so there is no standard. With the increasing demand for interactivity in large industries (such as banks), blockchain needs to be compatible with different systems and accepted by the public. The integration of the existing system and the blockchain is a very big challenge for the existing system, because the existing system cannot be completely replaced. If the blockchain technology can make multiple systems work together perfectly, then the operational feasibility can be fully satisfied.
Privacy: The endorsement of banks and financial institutions is people's trust in their deposited funds. If you want the blockchain to replace them, it is very important to ensure that the data stored in the blockchain is safely stored and will not change anyone's identity. Since the transfer of information is carried out publicly on the blockchain, it is also necessary to study the private chain, which is also helpful to solve the interaction problem.
Encryption: Private keys are the basic elements of the blockchain system because they play a very important role in ensuring the personal data of the blockchain. However, once the private key is obtained, it must be kept very safely, because once it is lost, it can never be found again. Moreover, there will be loopholes in the encryption method for storing data, which also makes the blockchain vulnerable to hacker attacks.
Security: Blockchain network is safe and reliable because it incorporates encryption technology. In order to prevent hacker attacks, any encryption performance in such systems requires a lot of computing power. When the blockchain network is applied to any banking institution, it must be encrypted by multiple security protocols. The network needs to have enough computing power to prevent anyone from controlling it unless it is based on specific access rights. According to these requirements, such systems or institutions included in the blockchain may or may not be licensed. People in these organizations need to be able to handle different levels of access permissions so that they can protect the entire network from fraud and cyber attackers.
Scalability: The growth of existing data is undeniable. With the increase of population, the database will also grow. This will bring great challenges to the application of blockchain. The network created through blockchain should be able to handle the increasing traffic while maintaining the speed of network participants. If blockchain technology can be applied to current banking systems and institutions, it must be able to ensure the ability to handle these data streams.
Energy consumption: Most blockchain networks are based on workload proof mechanism, in which network participants will be rewarded according to their speed of solving problems, which will also be based on their speed of solving problems, thus putting new blocks into the network. This can make the whole network run stably and increase energy consumption. This computing power will consume a lot of electricity, which will affect the environment. Before accepting blockchain technology, these problems need to be solved through other incentive mechanisms.
Legal supervision: If the blockchain is applicable to the banking industry, then international supervision regulations are very necessary. Now, as the most popular application of blockchain, digital currency has no regulatory regulations, which has both advantages and disadvantages. However, if the blockchain is applied to banks and financial industry, it must be supervised to avoid people's troubles due to losses.
conclusion
Although the regulatory requirements are very strict for the banking industry, financial institutions have also begun to use blockchain technology as a solution. Banking giants have begun to test the potential use of decentralization technology.
Institutions are investing heavily in the research of blockchain solutions. Let the blockchain enter the current industry, and many problems will be solved. Because this technology makes the system more transparent, reliable and easy to use.