According to the World Economic Forum (WEF) Blockchain is going to be the technology to serve as “the beating heart of the financial system”. This single utterance is enough proof of the huge impact of this revolutionary technology on blanking and financial industry. But for people who have little idea of what Blockchain is and why the financial industry really requires it, this blogpost can really be an eye opener.
- What is Blockchain?
Blockchain is a database technology that we’re first used for digital currency bitcoin. Ever since it’s launch in 2009 it continued to be popular for financial and banking industry because of cryptography in database to allow users make changes in the ledger without being able to delete or tamper with the previous records. Blockchain proved to be a very unique and secure database for this ‘write once read many times’ capability to accommodate ledger entries.
- The Promise Of Blockchain For Banking And Financial Sector
Back in 2009 nobody was really assured of how Blockchain the technology behind the digital currency Bitcoin is going to make an impact for future digital transactions, particularly in financial and banking industry. But, over time the impact really proved to be commendable and the promise seems to be huge.
- Fast Paced Transactions
A vast majority of financial transactions that actually occur with the involvement of some third party service providers take huge transaction time. These third party services dubbed commonly as payment gateways can now be replaced with a comprehensive real time payment solution involving Blockchain technology. With Blockchain a payment no longer takes days to process and reach from one party to the other.
- Transparent And Verifiable
The biggest advantage of Blockchain for all kinds of financial transactions is its transparency. Users can access transaction anytime and anywhere over the web. When a transaction is done Blockchain locks the data with the time stamp that further cannot be deleted or tampered with. The full historical data of every transaction can be accessed and verified over the web.
- Lower Transaction Cost
With faster transaction and absence of any payment gateways, the transaction cost gets significantly lower as all types of third party charges remain non-existent. This particularly benefits financial institutions and businesses requiring transactions throughout the day.
- The Future And The Challenges
With the increasing popularity of Blockchain among the financial institutions and businesses, the challenges for this technology are also mounting up. One of the biggest challenge is the increasing risk of cyber attack that threatened many banks in recent times. While banks are still reluctant to leave their data outside of security firewalls, Blockchain only addresses the security flaw by stricter authentication process. Now, many banks still consider authentication however strict it seems is not enough to prevent all Marion’s attacks and hacking attempts.
There are also challenges in terms of regulatory hindrances from many financial institutions and banks. The regulations of central banks, financial policy decisions, administrative procedures, all these and many other en-route hindrances make Blockchain still a not-so-lovable proposition for bankers and IT thinkers of financial industry. Blockchain as a technology still depends heavily on the mercy and understanding of the government and decision makers in public bodies. Until the promise of the technology receives a cumulative view and acceptance from decision makers, it cannot make inroad as faster as it was expected.