In the initial days of the banking sector, all the details were manually written in large registers. The data entry experts were probably the clerks who maintained the record of the daily transaction. The system was not automatic and all tasks were dependent on individual beings. But in the 20th century with the evolution of computer systems, a new door to technology opened new avenues for future banking.
Not only security cameras, heat-sensitive instruments, eye scanning, and finger matching machines can be found in the bank. But we can also see the high tech computer well integrated with advanced networking and fast internet. Some advanced tech is hidden from the public eye. It commonly refers to the incorporation of the country’s data registration in the banking system and police alert management system. Similarly, blockchain technology is an invention of the 22nd century and is rapidly being employed by the banking and finance industry. Let’s check out the importance and benefits of the usage of blockchain in the financial sector. But first, we should have an understanding of it.
Understanding Blockchain
The first ever documentation on blockchain technology was recorded in the 1990s in a research paper by Stuart Haber. Later, Nick Szabo put forward a secure digital payment system based on the blockchain system. Blockchain is a decentralized, immutable digital ledger that can be configured to record any economic transaction, not just financial ones. The technology underlying blockchain is quite advanced, but I will try my best to explain it to you in simple words.
Use Of Blockchain:
Blockchain is a distributed database that allows the transparent sharing of data among various networks. It is a technology that allows you to store data securely and transparently. Blockchain ledger technology can be used for recording transactions and making them visible to all parties involved in the exchange.
This means that everyone who participates in the transaction can see it, which is particularly useful for financial transactions as it allows for complete transparency and accountability. There are many different applications of blockchain technology, but they all serve the same purpose: to record transactions in an encrypted and confidential manner. Blockchain is not only useful for financial transactions; it can also be used for other purposes such as contracts and identity management systems.
Blockchain in Banking Sector:
A distributed ledger that keeps track of transactions across several computers is known as a blockchain. The technology has been around for over a decade, and it has the potential to transform banking and finance. Here are some of its key functions in this industry:
1. Record keeping:
Blockchain provides a secure way to track assets and transactions across a network. This makes it possible for banks to maintain records of their operations. They make sure they are not duplicating efforts by having multiple systems that serve the same purpose.
2. Transparency:
It provides transparency. Blockchain records all transactions on a public ledger, which is visible to all users in the network. This makes it easy to see who owns what when they bought it, and how much they paid for it. In short, it is an open book, accessible and viewable all around the world.
This transparency allows users to know what transactions have taken place between them and others. It also enables them to confirm that they have received the money they are owed without having to rely on third parties such as banks or other financial institutions (who may not be trustworthy).
3. Security:
Blockchain is highly secure, as it uses cryptography to keep transactions safe. This security comes from the fact that every transaction is recorded in a block that cannot be changed once it has been added to the chain. Therefore, anyone attempting to hack or dismantle a chain would have to change all previous chains too. As it is almost impossible to do for every transaction so the money is safe from any negative happening.
Benefits of Blockchain in Fintech:
The banking sector has smoothened its way and with the incorporation of IT, the banking sector has started to accept E-payment via apps and websites.
Let’s explore some of the key benefits of blockchain in the fintech industry.
1. Prevent Fraud:
It provides security against fraud and theft. Because every transaction on the blockchain is verified by multiple users, it prevents fraud or theft from happening easily by making sure that only legitimate transactions are recorded on the public ledger.
2. Easy Tracking of Money:
It makes it easier to track the supply chain because each transaction on the blockchain is linked to a particular item or product, making it easier for businesses and consumers to track where their items come from and what happens in between when they are being shipped from one place to another
3. Lower Costs:
It lowers costs for financial institutions by reducing their infrastructure costs and maintenance costs because they don’t need to maintain their servers anymore to record transactions on the blockchain network, instead, they use cloud computing services provided by other companies such as Amazon Web Services (AWS), Microsoft Azure or IBM Cloud Platforms (IBM).
4. No middle man:
It reduces operational costs because there is no need for middlemen like banks anymore when transferring funds between two parties by using the blockchain network.
5. Fewer chances of Security risk:
It reduces fraud by making it harder for hackers to access sensitive information because every transaction is recorded and verified by miners before being added to the blockchain.
Best Blockchain Developer And Service Provider
The Digitech Resource Group is the top-rated and best blockchain service provider all around New York. They have a team of highly qualified data engineers, software developers, and machine learning experts. To date, they have served more than 500 clients all around the world. We can develop software where blockchain acts as a service. Our developers can use the power of cryptocurrencies to integrate into your system or even use NFT to create a new user experience. If you want to get a consultation on decentralization or blockchain in the development process, you may contact us at info@tdtrg.com.