Blockchain is the new king in the arena, and the recent uptake, especially in the banking sector, which had all along been very skeptical, is a confirmation. Barclays, the British universal bank, leads the pack with investments in more than 19 blockchain firms, while Citigroup, Goldman Sachs, JP Morgan Chase, and others trail closely.
These are institutions with some of the best financial analysts, and their adoption should send a strong signal to everyone in the financial sector: it is time to move to blockchain. So, are you ready? We know that by its mere complexity, taking the first move can be a hard decision to make for many.
So, to help you make the decision, let’s take a deeper look. This post will highlight some of the major advantages that you should expect for adopting blockchain in your enterprise.
A Brief about Blockchain Technology
Before we can explain how blockchain technology works, let’s start by understanding what it is. Blockchain is a system of recording information in a manner that makes it very difficult; call it impossible to change or cheat the system. It is a public digital ledger or database that contains transactions that have been done on the respective blockchain. Bitcoin was the first blockchain to be created in 2009, and, 13 years down the line, it is still the indefatigable network to beat.
So, how exactly do transactions happen in blockchain networks? Unlike banks or traditional financial organizations, blockchains operate on a peer-to-peer basis. This means that for a transaction, such as sending money, you relay the funds (crypto coins, in this case) directly to the recipient. It also implies that the middle parties are eliminated, the transaction charges are lower, and the process is completed rather fast.
When you initiate a transaction, the details are confirmed by third parties/ nodes that are spread on the blockchain network. Note that they only confirm the details, such as whether there are enough coins to send, and do not have a way of pulling personal data. Then, the information is captured on the next block, where it resides permanently. It is neither deletable nor editable.
Special Benefits of Adopting Blockchain Technology in the Financial Sector
Distributed ledger comes with a number of benefits for any financial institution, and you should not be left behind as others enjoy them. The most notable of these benefits is that payments are cross-border.
Unlike other methods of payments, such as wire transfers and credit cards that can easily be blocked by political administration of the day, blockchain is different. You can make transactions with any person no matter their location on the globe. Here are other benefits that you need to know:
- The payments are cleared instantly because there is no centralization
- You pull down counterparty risks
- The application of smart contracts helps to improve contractual performance
- Offers alternative sources of capital for your capital
- It will be an additional method of payment for your clients
- It makes it possible to maintain client’s personal details private
- Blockchain makes it possible for your company to access more services, such as crypto lending and staking
In this post, we have only scratched the surface; the benefits of adopting blockchain are a lot more. All that you need to do is understand how blockchain works and implement it correctly in your organization.
Indeed, more applications are expected to emerge with the growing acceptance of the technology. The best way to enjoy all of these products and services is by working with professionals. Visit Hi to talk to some of the best experts in the industry for assistance.
One of the best advantages of Blockchain technology is that it is far more secure than other record-keeping systems. Once the data is inserted, it cannot be altered or modified at any cost. It is because the chains are linked with one another, and if you change one, other chains can get affected.
Moreover, this technology eliminates the need for the second person as compared to traditional financial services. Therefore, it can help financial institutions save international transitions, and the future of this trend is indeed bright for all businesses and organizations. It is because its adoptions are increasing day by day by people all over the world. Thus, there is a great impact of Blockchain on the finance industry as it offers huge advantages.
Challenges of Implementing Blockchain For Financial Companies
If you are willing to use Blockchain for your business, then you also need to consider this from another perspective. Here, I am signifying the challenges to implementing Blockchain:
- Some regulators have accepted this technology yet because it is still a very new technology and developing rapidly.
- Governments can most likely institute systems that can affect Blockchain firms and other big organizations using it.
- Blockchain data cannot be altered or modified. This is truly a great challenge for small businesses or startups. Many individuals consider this as a benefit buy from the other view; it can be a disadvantage too.
- To implement Blockchain in their procedures, companies need to change their methodology.
- Another biggest challenge is that it can be very difficult for some companies to switch to Blockchain technology because it is very time-consuming and expensive too.
- Blockchain needs widespread adoption. This is very important in the financial sector because if one merchant is not accepting the trend, then it can be a hesitation for the second person too to accept the same.
The Final Thoughts
The two biggest Blockchain developments to look out for are interoperability and improvements in transaction processing. These two developments can be very useful for financial institutions.
However, although many challenges Blockchain technology is facing, many companies and organizations (both small and big) are using this fresh trend to improve their business procedures. So, now it’s time for every business to give it a try at this fast-evolving trend in 2024.
Let me know in the comment section below if you have any doubts regarding the above data and I will get back to you at the earliest!