Blockchain in Banking and Financial sector: The reality

BlockchainBockchain has been trending for a while and known better for its ability to bring transparency across business transactions. This open-source technology is set to revolutionize the world economy through cryptographic techniques that facilitate collaboration and tracking of all kinds of transactions and interactions.

Employing blockchain technology in the financial sector reduces the cost of online transactions and simultaneously increases their authenticity and security. It is also being used to protect sensitive records and to authenticate the identity of a user. It can drastically improve business processes by freeing transactional records from the historical constraint of isolation and eliminating the need for verification.

Of late, several leading banks and financial institutions have turned to blockchain.

French insurance giant AXA has launched a new flight delay insurance product that uses the Ethereum blockchain to store and process payouts. The product is used as a smart insurance tool for flyers to insure their trips if their flight is delayed. It also maintains a record of the insurance contract and serves as a mechanism for triggering the payment to the flyer once the delay for two or more hours has passed.

In September last year, China Construction Bank incorporated a blockchain solution in partnership with IBM to streamline transaction processing and enhance service delivery. With the help of a shared ledger, the solution enhances customer experience and the quality of services while also enabling faster processing time and increased transparency in transactions.

The use of blockchain technology in the banking industry is expected to reduce the risk of fraud in transactions. HSBC Holdings, having performed the world’s first trade finance transaction using a blockchain platform, says that it is a boost in efficiency in terms of international trade.

Allianz has been testing blockchain as early as 2015, when it revealed that it had brought in a blockchain startup within one of its programs. Allianz has recently issued a blockchain prototype that is aimed at providing a more streamlined approach for captive or self-insurance policies. The technology, according to Allianz, will help companies and their subsidiaries insure themselves without having to buy additional traditional policies.

BNP Paribas explores blockchain to optimize the bank’s global and internal treasury operations. It also views using blockchain-based solutions as an innovative approach to respond business needs and improve operational efficiency. This is because it provides a more integrated cash management approach between businesses, allowing greater flexibility and a 24/7 service capabilities.

Meanwhile, Bank of America uses the blockchain-based system to build an efficient, secure and reliable way to store records and provide access to authorized parties.

The implications of blockchain can be felt not just for the financial-services industry but across virtually every aspect of society. It provides a system that is more resistant and resilient to attacks, cheaper to maintain, simpler in managing, more scalable and could be used for innovation. The most significant benefit of the technology is that transactions can be done in real-time and without a verification system.

Yadawanka Pala

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