Why Are The Blockchain Disruptions In The Financial Industry Good For Business?

Since the inception of the blockchain technology in 2009, many experts have predicted major disruptions in the financial industry. This is because the working of this technology, whereby an open and decentralized ledger is used that cuts out third parties in transactions, blockchain can go a long way in transforming the way financial services are offered.

In fact, blockchain was designed in a way that can eliminate the need for banks if they fail to adapt to this technology. But much as some of the disruptions might be damaging to the financial institutions, the general public and the business community is bound to benefit from them.

The infographic that was originally published on BitFortune.net, explains the transformations that blockchain will impose on the financial sector. Here are the most important points we got from it.

Wipe Out Monopoly Over Transactions

Cryptocurrencies will wash away the storage of value monopoly that financial institutions have enjoyed for a long time, since those who want to make transactions will have to just open up a digital wallet and either store or exchange digital coins with other users, without the need for banks or other financial institutions.

Speed Up Transactions

With the elimination of a central clearing authority, users can quickly make transactions using their crypto wallets. Whereas banks take 3-4 days to complete international money transfers successfully, blockchain payment networks, such as Ripple, can do this within two and half hours.

Moreover, if financial institutions embrace this technology and get rid of the middlemen, their transactions will also quicken..

Offer Improved Security And Transparency

As this technology is built around cryptography, it makes it difficult for anyone to tamper with records or even hack the system, even though cybercriminals are working hard to disapprove this. Hence, it’s a secure way of keeping records of all kinds.

Also, it is open to the general public, meaning that anybody can access the information stored on it if there is a need for this.

Change The Lending And Fundraising Mechanism

If banks adopt the use of the blockchain technology to save data about their clients and their transactions, they will easily attain their information when they need to make credit decisions regarding the worthiness of a client to take a loan.

Fundraising and charities will also benefit from this technology. Because the blockchain technology has a tamper-proof and transparent nature, donors and sponsors can always check the public ledger where their donation is recorded and see if it is being abused. By being able to track such information, individuals and organizations will be more willing to participate in humanitarian activities such as making donations.

Reduce Costs

By adopting the blockchain technology that’s tamper-proof, banks will end up substituting the existing central ledger for the digital ledger created by themselves which is more efficient and secure. In doing so, they will be able to cut costs by eliminating the need for third parties, such as central banks or SWIFT that they currently use during transactions.

Similarly, the use of smart contracts in trades will streamline settlements and titling of financial transactions that involve the exchange of goods and services by also stamping out middlemen and the need for proof documents from banks. Consequently, the transactional costs that banks charge clients will significantly reduce.

As you can see, some of the disruptions in the financial sector have already taken effect, and as the usage of the blockchain technology continues to scale, we shall witness more changes.