How Is Blockchain Technology Helpful In A Banking Career?August 5, 2019
The Blockchain ecosystem has the potential to transform disruptively and every industry. The Blockchain career and a banking career with blockchains is the place to be because of the immense scope and demand for trained personnel.
What benefits does blockchain technology bring?
Let us look into the many advantages and terminology of blockchains. A Blockchain career is today popular across verticals and industries like banking, agriculture, healthcare, e-commerce, education, mining, property recording, retail, entertainment, media, automobiles, logistics, transport and many more.
Blockchain technology brings in the important four attributes of immutability, decentralization, transparency, and security. The benefits offered by blockchain technology are:
- The blockchain data structure is contained in the app-end and causes the data to be immutable, and impossible to delete or alter making its algorithm unhackable at the present time.
- The data ledgers are cryptography protected and contain hashtag functions from the previous block. This information is verified to complete the cryptography transactional process through crypto mining.
- The peer mining network has all transactions on the blockchain over all the interconnected computers thus decentralizing the system.
- User authentication and verification using blockchain technology sans third-party interference.
- Ledger consensus and record-keeping are enhanced as all data of transactions are contained in the block and are duly verified for maximum trust by the peer network users.
- The ledger is distributed over all blockchain nodes in real-time.
- Data is always retrievable and never lost.
- Transparent transactions ensure the viewing parties are verified authenticated users and reduce transactional ambiguities.
- Blockchain time-stamping ensures a recorded chronological order.
- The source of the ledger can be tracked at every block of the chain.
- Consensus between the parties ensures duplicity and fraud are removed.
- Smart contracts enable presetting criteria and conditions for automatic recording of transactions.
How do the banks benefit?
According to the experts, bankers, analysts, consultants, etc that spoke to The Financial Times, the top 5 areas that have the potential to be successfully transformed by blockchains are
Settlement and Clearing:
The bank network is a tangled network of securities, investments, and loans that need to be recorded, settled and cleared on a daily basis. And, this costs billions of dollars annually to run. Accenture says that this area of settlement and clearing could save investment banks up to USD 10bn who use blockchain technology for efficient settlement and clearing operations.
Payments systems from the central banks globally are moving to explore blockchain technology and shifting payments system processes to blockchains and issue digital tokens that can be used on the stock markets and cashed in at the central banks. Commercial banks to have pushed forward with their own projects instead. Ex: Switzerland’s UBS’ ‘utility-settlement-coin’ akin to the crypto coin issued by the bank. Swift payments, the cross-border payments solution of the banks is fighting off Ripple a San Francisco fintech startup in cross-border payments solutions.
LCs, trade finance, bills of lading, etc are still paper-transactions sent through post or fax globally. According to the R3 MD, Charley Cooper, this is an obvious area where banks can benefit from blockchains. HSBC’s Head of innovation in commercial banking, Vivek Ramachandran agrees that doing away with physical stamping through use of blockchain transactions could deal effectively with problems like his example of a ship delivery to Malaysia from Singapore taking a day versus the paperwork taking a week!
Customer Identity Verification:
Lenders are in reality trusted custodians of investor’s money and regulators will hold the banking agents responsible for authentication of records and checking the customer’s identity. This area is a vital banking-risk that blockchain-processing can easily overcome. It is an era of start-ups in the KYC blockchain-enabled systems. Some of them are Blockstack, Cambridge Blockchain, Credits, and Tradle.
It takes a long 19 days for US companies to raise syndicated funds from banks. Early repayments and foreclosures are still done on paper. To address the efficiency of this area Credit Suisse and 19 similar-minded financial institutions formed a work-consortium with the blockchain enablers to put the syndicated loans Synaps on a blockchain framework.
Looking at the benefits of blockchains, one wonders why banks are lethargic in the adoption of the superbly beneficial blockchain technology in banking and its related processes. However, it is also to be noted that the number of fintech startups has gone up in leaps and bounds making a Blockchain career highly lucrative and getting in ahead of the curve.
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