In the finance industry, a massive amount of funds are being transferred from one region to another on a daily basis. To do so in a secure, transparent manner, blockchain might be the long-needed solution financial institutions were waiting for.
Today, financial institutions are already exploring the possibilities of how blockchain can be used in their daily operations.
Indeed, blockchain’s transparency, decentralization, and immutability make it attractive for various domains in the financial and other business sectors.
Use of Blockchain in financial institutions
To this day financial institutions still need a lot of mediators to keep money safe and secure for their clients. However, the involvement of many people makes the industry extremely expensive and increases the risk of fraud and (human) errors.
Blockchain tech holds all the appealing features required by a dependable technology that involve money matters. It is transparent, safe, decentralized, secures transactions better and is cheaper than traditional methods for the transfer of funds. It also improves the overall customer experience with the help of decentralization and transparent network infrastructure.
How does it work?
Blockchain operates on a distributed database system (a chain of data blocks). All transactions (i.e. transfer of funds) are grouped and recorded in the form of fixed data blocks with a cryptographic mechanism. Each data block is matched to the next data block. If one block in this chain of blocks is tampered with, all the other sequential blocks immediately show the change. This makes it nearly impossible for hackers to interfere in any given transaction that is part of the blockchain. Any change made will immediately corrupt the entire blockchain making the fraudulent change visible and invalid.
Trade finance is among the most beneficial applications of blockchain tech in the banking industry. All the parties involved in a transaction can participate in a blockchain network and share information with other banks, exporters, and importers on a single common distributed ledger. When the specified conditions of the transaction are satisfied, the smart contracts will automatically implement themselves, and the involved parties can view all the actions done.
Some financial institutions already started using blockchain tech. Mr. Jean Chalopin, Chairman of Deltec International stated in a recent interview that Deltec International (www.deltecbank.com) has created a fintech division which specializes in blockchain tech implementation and research focusing on fast transactions and addressing various challenges for banks and the finance industry. “Deltec is highly focused on fintech banking, supported by A.I, blockchain, and deep learning,” said Mr. Chalopin.
The way of the future
“Blockchain technology is here to stay. The technology presents a clear added core-value to the way highly transaction-based businesses will operate in the future. Blockchain tech is also changing the way financial institutions manage their daily operations. If financial institutions want to stay competitive and efficient, they would better start looking for smart opportunities and possibilities to put the blockchain technology to use,” concluded Mr. Chalopin.
Disclaimer: The author of this text, Robin Trehan, has an Undergraduate degree in economics, Masters in international business and finance and MBA in electronic business. Trehan is Senior VP at Deltec International www.deltecbank.com. The views, thoughts, and opinions expressed in this text are solely the views of the author, and not necessarily reflecting the views of Deltec International Group, its subsidiaries and/or employees.