Top 5 Use Cases of Blockchain Technology in Financial Services
Blockchain technology drives tremendous changes across the financial services industry. The decentralized financial services have brought a vast improvement to the centralized banking system.
Notably, while we are talking about the banking and finance sector, there are hundreds and thousands of funds being regularly transferred from one region of the world to another. This makes the financial system one of the most popular sectors that could be benefited through blockchain.
Let’s have a look at some significant use cases of blockchain technology in financial services:
- Know Your Customer (KYC)
The financial institutions are concerned about the increasing costs that they have to bear to comply with KYC. As it is a time-consuming process, it has to be performed individually by all the banks and money based institutions. Nowadays, the banks need to upload the customers’ KYC data into a central registry to check the information of an existing or new customer.
By accepting the blockchain system, independent verification of each customer by one financial organization can be accessible for other organizations so that the one doesn’t have to restart the KYC process again.
2. Auditing and Bookkeeping
Standardizing the financial statements with the help of blockchain technology allows the auditors to verify the most critical data automatically. This decreases costs and saves time. The blockchain technology makes it possible to prove the integrity of electronic files. An auditor can create the fingerprint again and compare it with the one that is stored in the blockchain, to determine the integrity of files and documents. Using blockchain, the audits can be conducted in real-time.
3. Smart Contracts
The smart contract, a self-executable piece of code, runs when certain conditions written on it are completed.
Using smart contracts for financial transactions helps increase the speed of the complex processes. This also ensures the accuracy of transferring the information as the transaction will be approved only if all the written conditions of the code are met.
4. Digital Identity Verification
Identity verification is the crux for every transaction that is made with your debit card or at your local bank branch. Your identity is inextricably linked to your assets. Blockchain technology can verify the identity while still separating identity from transactions by using the public-private key system. Some of the blockchain’s financial services applications can verify the identity.
5. Fraud Reduction
The involvement of money increases the chances of fraudulent activities. Almost 40% of financial bodies are susceptible to heavy losses relating to economic crimes. The reason behind this can be the usage of centralized database systems for operations and money management. Blockchain, a secure, non-corruptible technology, works on a distributed database system. Therefore, there is no chance of a single point of failure. All the transactions are stored in the form of a block with a cryptographic mechanism that is very difficult to corrupt. Using blockchain technology can eliminate the cyber crimes and attacks of financial sectors.
Conclusion
The blockchain technology can secure the financial and banking sectors more than any other system or technology can. There are big giants in the financial industries that have started conducting the tests for finding out the use cases of blockchain, the decentralized technology for their business processes. There are various blockchain developers & blockchain development companies like OpenXcell, who are also investing heavily in such researches and developments.
