Blockchain, a leading technology trend, is a distributed database/ledger enabling transactions between entities without a middleman. It exhibits an immutable ledger that improves records transparency and enhances transaction speed or efficiency.
Banking and financial institutions continuously look at ways to improve the customer’s journey and enhance the experience. Banks are looking at self-service and digitally reliant solutions that can empower their customers and increase retention. Despite the security and transparency offered by Blockchain, the banking team is unconvinced about the technology. They are still contemplating proceeding with Blockchain app development.
A few structures and examples lead us to believe banks can benefit greatly from this technology. Let’s look at how the banking industry has experienced an overhaul and significant increase in its bottom line with Blockchain.
Top Ways Blockchain has Redefined Banking Industry
Here are all of how Blockchain technology will benefit the banking industry. It will empower the client-facing and backend processes to streamline operations and enhance the outcomes for the industry.
#1 Accelerates Loan Processing for Faster Disbursements
Loan processing is a major bottleneck for the banking industry. It takes up a lot of time and eats into the productivity of the backend processes.
In a traditional environment, the underwriter goes through the entire record and history of the loan seeker. They will then calculate the credit score and debt-to-income ratio, which will help determine the loan amount.
This calculation will also let the banking executive responsible for loans know how much to disburse as per their history and scores. The discrepancy in the loan amount disbursed, errors in calculation and delays in processing are possible issues with the traditional method.
The perfect amalgamation of Blockchain with AI can help reduce the security leaks within the data calculation and insight building. It will speed up calculations, automate mundane tasks, and ensure quicker outcomes.
As it is based on a decentralized ledger, you cannot change the scores or cause any mutation. Eventually, your services are secure and empowering and result in better experiences. As they are immutable, customers tend to trust you more.
#2 Faster and Secure Payments
Payment processing is the foundation of the banking industry. It is one of the primary pillars that make the industry stand tall. The traditional methods are mutable and need to be more transparent. However, Blockchain-based payments can speed up the payment processes and increase transparency.
You can enjoy a single mode of payment for all your transactions via cryptocurrency. Moreover, the transaction fees go low with Blockchain, which results in low overhead expenses and increased profit margins.
Blockchain-based payments are faster, completely secure ( even when they occur on third-party channels), and decentralized (there is no need for a middleman to manage the transactions). Eventually, you will notice improved experiences and satisfied customers in your bank.
#3 Efficient Trade Finance Transactions
This is one of the strongest pillars of the banking industry. The industry relies of efficient trade to improve its bottom line, conversion rate and reputation in the finance industry.
The banks function to enable trade transactions, make operations smooth and facilitate the trade. These processes can take up a lot of time and effort as it requires too many details, paperwork, and man hours.
Blockchain reduces the need to process the aspects of trades manually. With smart contracts and cryptocurrencies for transactions, businesses can automate payments and secure their trade contracts.
As a result, everything within the trade is decentralized, which gives a better view of the processes and increases the chances of making it more efficient. The banks can identify ways to increase the performance of transactions and make them more secure.
#4 Improve the KYC (Know your Customer) Processes
Banks must work on Know Your Customer processes to handle fraud and improve security. It ensures identity verification and helps prevent fraud. However, this process in the traditional environment is carried out manually. As a result, it takes up a lot of time and money.
There could be possible inaccuracies within the system as most of the validation is done without the digital footprint.
Blockchain has redefined the KYC processes to make them more fraud resilient. It will accumulate the digital footprints and secure them on the decentralized ledger, which cannot be transformed. This will ensure that no one can remove or change the KYC details from the system. It increases security and allows easy access to the details for people with requisite permissions.
Eventually, it reduces the need for separate KYCs for the different banks. It will enhance the customer’s journey through the banking industry, thus leading to a better retention rate.
#5 Swifter Movement of Money Globally
The traditional money movement across banks in the global structure depends on able bodies such as SWIFT. Despite the middleman, you must wait three days for the transfers to occur. This costs a bit of money, causes hurdles in the operations, and causes obvious issues with customer experience. The middleman makes the customer wait, which eventually disturbs their experience.
However, Blockchain aims to simplify transactions and make them efficient and real-time. They remove the need for SWIFT, and offer better transparency into the money movement. As the transactions occur on the Blockchain network, and it is a decentralized ledger, everyone can see it. As a result, it aims to lower the transaction fee and speed up the transactions.
Top banks such as JP Morgan and Citibank have adopted the latest technologies like IoT, Blockchain and Artificial Intelligence to secure transactions and enhance customer journeys. Blockchain can accelerate digital transformation, make banks more efficient and lower their operational expenses. To leverage the brilliance of the technology and improve transactions, you need a to software development partner. Your banking app development partner with Blockchain expertise can help you enhance the digital movement and offer exceptional solutions to meet unique goals.