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Blockchain Technology in Finance

The financial industry has been observing the possibility of banks using blockchain technology to deliver process efficiency and eliminate risks. In addition, the banking professionals have also looked into the blockchain’s viability in improving revenue and providing an exceptional user experience.

A study by IBM established that over 91% of banks have invested in blockchain technology, and 66% of the institutions are planning large-scale production and operation through the blockchains.

The developments mean, with time, blockchain will not be a reserve of cryptocurrencies. Instead, it will be a mainstay in the mainstream financial system.

Here are some of the things to know about blockchain technology in finance.

Benefits of blockchain in finance

The main reason for the popularity of blockchain for finance professionals is due to the multiple benefits. Technology is revolutionising the financial sector by incorporating a secure, more open, and inclusive network. The banking and finance sector also gains from the reduced cost of operations, efficient processes, and ease of creating and deploying new products and services.

Some benefits of blockchain technology in banking include;

  • Security – blockchains contain distributed ledgers for financial services. Any transaction that occurs is included in the ledger and cannot be altered or edited in any way. To modify a ledger, a hacker or any other third party would need to change every other copy, which is almost impossible.
  • Transparency – blockchain technology in finances uses smart contracts that allow users to set guidelines. Smart contracts can only deploy when all the underlying provisions are met.
  • Trust – the transparency of the blockchain and the immutable ledger makes it possible for various groups to reach agreements on the various delicate financial services.
  • Privacy – blockchain technology is made up of a high-end software system that allows for selective data sharing. It blocks any unauthorised data access for efficiency and data security.

Common blockchain uses in financial services

Here are some of the common uses of blockchain technology in financial services;

Capital markets

The capital market gains from blockchain technology as it eliminates any single point of failure in the system. The digitisation of services ensures streamlined processes, decreased settlement times, and reduced operational costs. In addition, the tokenisation of assets and other financial instruments allows for easy management and trading.

Asset management

Blockchain technology seems the leading solution to various venture capital, real estate, and private equity firms’ issues. These entities are looking for ways to improve risk management and comply with the changing regulations.

Blockchain technology helps streamline asset management as it automates funds to launch and improves stakeholder engagement by availing digital assets. The technology also enhances governance and transparency and offers a broad market for assets developers.

Banking and lending

Blockchain is usable in banking to streamline services, reduce fraud and other risks, and decrease settlement times.

Banks using blockchain technology gain from reduced operational risks as it authenticates user documents in real-time. The technology also facilitates the collateralization of assets and automates various banking processes like underwriting and fund disbursement.

Other use cases

Blockchain technology is also applicable in other financial services like payments and remittances, trade finance, and insurance.

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