Many would lead you to believe that blockchain tech and banks are like cats and dogs. The statement is not entirely true, even if there are spheres where these sectors might choose different ways. However, blockchain has proven to have applications that financial sector saw as very interesting and its solutions have been already applied in some banks as well.



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How could banks use Blockchain technology ?

Although Blockchain technology could be applied to many data processing functions, payments and fraud reduction are two areas with immediate traction.


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Transferring money is currently time-consuming and often requires financial intermediaries, each of which takes a service charge and is subject to greater regulation and higher costs due to the prevalence of fraud. Blockchain reduces the number of middlemen while increasing security, which could reduce industry-wide transaction and processing costs by billions. But this reduction in back-office red tape comes at the cost of eroding traditional roles within the financial industry.


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Blockchain could also lead to greater trust between trade partners due to their access to shared, trustworthy records and the technology’s strong security features. This, along with real-time transactions, will increase the velocity of money and in turn cash flow and capital investments.


Pundits have speculated that Blockchain will spell the end of money as we know it, via Bitcoin and other cryptocurrencies. Although they pose an interesting challenge to central banks’ control of monetary policy, it’s often overlooked that Blockchain could also signal the end of traditional banking too. After all, the technology opens up ways for individuals and corporations to transact directly, without legacy payment networks, proprietary bank systems or bank accounts – and therefore without banks.

If businesses see significant cost savings in offering customers different ways of paying, there will be a rise in non-banks and untraditional financial institutions – with a potential decrease in consumer banking costs.

The next steps for Blockchain
It’s still early days for Blockchain. The nature of the technology means that solutions tend to be leveraged across multiple parties rather than within a single banking system – which will require an unusual level of cooperation between banks. But if enough parties realize the benefits and agree on common standards and solutions, the potential impact is ground-breaking.
And with 80% of major financial institutions currently experimenting with Blockchain across areas as diverse as payments, anti-money laundering, CRM and syndicated loans, that may be sooner than you think.

The future of Blockchain banking

Blockchain and distributed ledgers have a bright future. As real-time, open-source and trusted platforms that securely transmit data and value, they can help banks not only reduce the cost of processing payments, but also create new products and services that can generate important new revenue streams.


The biggest key to turning blockchain’s potential into reality is a collaborative effort among banks to create the network necessary to support global payments. Banks need to look at the bigger picture and work together—and with non-banks—to help define the backbone that can underpin a universally accepted, ubiquitous global payment system that can transform how banks execute transactions.
In the words of one executive we interviewed: “The technology will only work if everyone adopts it. It has to be all or nothing.”

Conclusion

Despite the strict jurisdictions around the banking sector, the financial institutions have started to realise the potential of blockchain technology seeing the popularity of cryptocurrencies in the current markets. The big giants in the banking sector have started conducting the tests for finding out the possible use cases of this decentralized technology for their business processes.
Moreover, some of the organizations are also investing heavily in such researches and tests conducted by startups to develop blockchain based solutions. With Blockchain entering the current scenario, a lot of problems could be solved while making the system more transparent, easy to access and reliable.