With the growing need for digitization and innovation, Blockchain technology has proved its worth for its adoption in the banking sector.
Blockchain technology is a digitally distributed and public ledger that records transactions between two parties permanently without any centralization.
One of its numerous advantages is its ability to reduce the amount of time and effort efficiently. Also, the transactions are safe, secure, and transparent with a respect to the user’s privacy.
Blockchain can thus transform services provided by banks to a greater extent.
How can Blockchain Transform the Banking Sector?
As blockchain technology uses a decentralized structure, it ensures faster transactions with very less or mostly no fees for processing. Like the ordinary banks, there is no paperwork required for security but follows an end-to-end encryption method which is safer.
The process of taking credits and loans is simpler as blockchain, unlike the traditional banks, do not check the income, assets, and so on to lend a loan to the client. By doing so one has to lend their personal information to the bank. This sometimes might not be secure. Hence, blockchain provides the user with their privacy and security while being transparent.
Trading and financial sectors related to international trade and commerce will not have to follow procedures such as invoices, letters of credit, etc by using blockchain technology.
Also read: How is Blockchain Technology Disrupting Leading Industries?
Also just like how currency from different countries is exchanged, Blockchain technology also has a scope to exchange liquidity among blockchains. One such decentralized multi-chain liquidity protocol is linked here.
Indian Banks’ Protocol to Adopt Blockchain Technology
With the drive for digitalization, 15 Indian banks now have come to a common ground to adopt blockchain technology for processing inland letters of credit (LCs).
It includes 10 private sector banks, 4 public sector banks, and an international bank. These banks collectively invest an equal share of INR 5 Crore which is a total capital of INR 75 Crore on a company called Indian Banks’ Blockchain Infrastructure Co Pvt Ltd (IBBIC).
IBBIC aims to provide a platform for exploring, building, and implementing Distributed Ledger Technology (LDT) for Indian financial service sectors.
IBBIC seeks the aid of the Infosys Finacle Connect platform for automation and digitizing inter-organization trade and finance processes.
The Reserve Bank of India (RBI) also supports the venture and is setting up methods to develop a model blockchain platform for banking requirements.
Final Words
Blockchain is thus the lead for innovation and a digitalized future. This lead is widely accepted and hence has a good scope for any bank to pitch upon.
Many international banks such as Goldman Sachs, JP Morgan, Swedish Central Bank, HSBC, etc have adopted or are adopting blockchain technology.
Banks are now trying to resolve and research problems like liability due to any fault in the blockchain technology and hence, are expected to soon adapt to it.
Considering all the above-mentioned reasons, banks will definitely have to extend to the use of blockchain for increasing possibilities that were not possible in the recent past.
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