The banking sector sees great potential in blockchain technology to overcome current problems such as fraud prevention, secure transactions and loss of customer data. The blockchain is a distributed ledger that stores data from each transaction in an encrypted form and the stored data is immutable but can be viewed by entities on the chain. Below are discussed some ways in which blockchain would be useful to the banking industry.
Deletion of third parties
Currently, the banking sector relies on a centralized storage system highly prone to cyber attacks and hackers can easily get their hands on sensitive data. The decentralized blockchain register seems to solve the problem because the data is distributed over the network and because the transaction in the network is peer-to-peer and automatically eliminates third-party intervention that does not result in any loss of data for customers .
Security and transparency
Blockchain automatically authenticates its users, which means that entities on the blockchain network will be validated before using them, eliminating fraudulent users and transactions. In addition, the technology stores the data of each transaction within the chain, immutable but can be viewed by all entities on the network providing the required transparency.
Customer identification system
All banking organizations require KYC details to verify their consumers, and customers also need to provide these details multiple times to each organization by creating personal data silos. Blockchain's distributed ledger would allow customers to securely record their data in one place and share it with their respective banks. This process will strengthen trust between banks and customers and will also provide ownership of data to customers.
Change loans and credits
Banking and financial services go hand in hand, but they lack a reliable system to operate on. A distributed and decentralized system can be a solution to this since it will first eliminate control and be immune to bankruptcy because an organization would not control deposits. The funds will be distributed ensuring greater security against fund fraud and the most reliable system will be established between banking and financial services.
Penetration of cryptocurrencies
The cryptocurrencies are until today the most popular and successful application of blockchain technology and with the banks that embrace the blockchain would also lead to the penetration of the cryptocurrency. Few banking organizations have already started experimenting and integrating cryptocurrency like bitcoins into their banking system and if the results will be satisfactory as compared to more this usage will be observed.