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How Blockchain Could Disrupt Banking & Finance

When Bitcoin was born, the finance and banking sector did not look at it as a Revolution but rather resist the blockchain and the advantages it brings about. However, as time passes, the advantages of the new technology will slowly become more accepted. Moreover,it might not be long before we see decentralized banking become a utopian reality.

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How Blockchain Could Disrupt Banking & Finance

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  1. Blockchain Revolution in Banking & Finance Sector

  2. A Glimpse of the Future • Blockchain technology has the potential to save billions of dollars by reducing transaction and processing costs. • The technology used for multiple processes in banking and many financial entities is already adopting the future tech. • The Australian Securities Exchange has started to use this distributed ledger technology for cutting costs and improving efficiency. • JP Morgan, one of the leading banks in the United States, has its own blockchain – Quorum and cryptocurrency called the JPM Coin. • Glimpses of events like this should speak volumes about what the future holds for banking and financial services when it comes to utilizing the new technology.

  3. A Few Applications - Reducing Instances of Fraud With immutability and decentralization, blockchain technology would help mitigate instances of fraud Leading reports project a 45% probability of financial intermediaries like stock exchanges experience financial crimes. Most of the banking systems are built on centralized databases, which naturally makes it more vulnerable to cyber-attacks. However, with the new technology, the instances of attacks on centralized points of vulnerability reduce considerably, almost bringing it down to zero. 3

  4. A Few Applications - KYC Growing instances of money laundering, financial institutions obligated to comply with the KYC (Know Your Customer) norms The institutes spend anywhere from $60 million to $500 million every year for establishing KYC compliance, as reported by Thomson Reuters survey. These regulations, in addition to reducing money laundering, are also expected to mitigate terrorist funding activities. Blockchainallows an organization to access the verification details already performed by other organizations. Hence, avoid the repetition of the KYC process and consequently, the cost involved and the time spent. 4

  5. A Few Applications - Smart Contracts Smart contracts are self-executing programs that govern the functionality of a blockchain. The execution of a smart contract can be programmed to happen after two or more parties enter the credentials. This entry of credentials can automate financial transactions by reducing the time taken without compromising on trust. 5

  6. A Few Applications - Clearing and Settlement Record keeping of loans and securities alone costs investment banks billions of dollars. In today’s messy ecosystem, the current system is managed by messages and manual reconciliation. However, blockchain can change the way it functions. The Australian Securities Exchange is a living example of the transformation that the new technology can bring about. 6

  7. A Few Applications - Trade Finance Letters of credit are being sent by fax or post around the world. However, with the blockchain coming in, all the parties involved can access the same information without compromising on the security. The head of innovation at HSBC Products has stated that the the new technology has the potential to be the genuine game-changer in this segment. 7

  8. A Few Applications - Syndicated Loans In the United States, it takes an average of 19 days for a bank to settle the transaction when a company raises money using a syndicated loan. When the loan changes hands or when the borrower decides to foreclose the loan, the communication is still exchanged by fax. Today, there might be challenges in finding a separate blockchain to connect with each other to facilitate the change of ownership of a loan. However, in the long run, it is quite clear that the technology will evolve to accommodate this process as well. 8

  9. Clearing and Settlement The Conclusion • Right from 1765, it is quite known that any Revolution is met with resistance! When Bitcoin was born, the finance and banking sector did not look at it as a Revolution but rather resist the blockchain and the advantages it brings about. • However, as time passes, the advantages of the new technology will slowly become more accepted. Moreover,it might not be long before we see decentralized banking become a utopian reality. 9

  10. THANK YOU + 91 6382 665 366 info@blockchainappfactory.com https://www.blockchainappfactory.com/blockchain-development-company

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