The technology industry has been the main factor in economic growth since the beginning of time, but it’s also the reason that major companies in a variety of sectors are concerned about the way it could impact specific business transactions. Think about blockchain technology, which is a popular feature on cryptocurrency platforms. There are experts who believe it could significantly alter the banking system as we know it today.
This insight has merits on its own, since the rapidly evolving cryptocurrency market already has disrupted a lot of financial transactions around the world. Many people are moving to this trend because the technology is beneficial in streamlining e-commerce processes and even that are used in real-world business. Like other innovations that are advancing technology, blockchain has some drawbacks of its own, too. There are security concerns that plague the cryptocurrency network, despite rigorous security protocols.
However, the benefits outweigh the risk associated with investing in crypto. Investors and traders are aware from the start that this market is uncertain and speculative. For those who do not think so, it could be something to think about in the future, and one-time and forever. For beginners, it is recommended to choose an easy-to-use trading platform like that offered through Bitcoin Evolution.
However, thanks to Blockchain technology helping facilitate the financial transactions, customers can be assured of security and transparency. The question of what it can do to transform the banking system is discussed below to your benefit.
Banks Have Recognised Blockchain’s Potential
From the perspective of different banks across the globe Blockchain is an effective instrument that could change the way financial transactions. Its applications range from reducing the complexity of processing to speeding up time. For those who aren’t acquainted with the technology it’s essentially a tamper-proof technology of ledgers distributed, which are the basis of the cryptocurrency.
Nowadays, there are many large financial institutions, such as stock exchanges, investment banks and central banks who are working on their own blockchain-based innovations in order to keep pace with current trends. They have announced their interest in blockchain technology. Although many consumers are aware of this ongoing technology but they could be able observe its effects on the next transactions.
- Payments and Remittances
Most likely, the most evident and fundamental application of blockchain technology is the payment system. Many cryptocurrencies are being utilized as digital currency and as a means to make worldwide payments. The transactions are more efficient and quicker as it needs only an internet connection to process. For remittances, blockchain technology eliminates negatives of fees that are higher and processing times that are slow, and tax and legal concerns.
- Secondary Market Trading and Clearing
The purchase of shares from a company and then swapping them for a currency that is not traded will generally require the clearing and settlement of trades. The contract and ownership of tradeable assets should be checked and documented. Thanks to blockchain technology, clearing and exchange costs are now able to be added to the price of every trade, and grow in size in the future, when you consider an abundance of transactions.
- Account Balances and Deposits
Banks are frequently utilized by customers to store deposits in savings and checking accounts. The issue is that the money deposited into the account is as part of the fractional reserve banks. This means that the majority of the money that you look at in the balance isn’t in fact held by the bank. This isn’t the case in the case of blockchain-based ledgers, as all accounting transactions are recorded according to the blockchain model. It provides the security of your data, as well as less costly maintenance of accounts.
- Primary Market Issuance and IPOs
Not just secondary market trading may be found on blockchains, but primary markets are also available. Numerous companies are looking to raise capital via initial public offerings. This approach can be quite expensive and could require the assistance of an investment banking institution. One option is sending shares of a company directly to the blockchain system, from which they are able to be traded in exchange for cash. Then, the digital shares can be traded in secondary markets using blockchain. Experts in the field believe that this technology could cause a massive disruption for asset exchanges and the investment banking industry when it is accepted by the general public.
It is evident from the preceding evidence that blockchain technology goes far beyond than just cryptocurrency. Numerous financial institutions have recognized its potential to lower expenses and simplify financial transactions. This is made possible by its decentralised, tamper-proof and immutable attributes.
As customers may have noticed this technology has already made significant improvements in the banking industry and this is expected to be the case in the next few years.