Blockchain technology has emerged as one of the biggest disruptive technologies in terms of digital transaction management in the last decade. The applications of this breakout technology ranges from its use in industries like music, voting, banking, identity management, government functioning, etc. to record-keeping, finance, digital payment processing and fighting counterfeits.
Every industry that has ever existed on the planet is looking to leverage and capitalize on this buzz-creating technology, that has cemented its place as a technology that is going to disrupt the global landscape of digital business in a way that the man has never ever seen till date. That’s the degree of impact it has already created among industry folks.
How Blockchain Works
Image Source: blogs.thomsonreuters.com
Banking Sector Been Affected Most Violently
The banking sector however, has been among those fewer industries that have been affected by the blockchain boom.
The reason being an industry, where there existed so many middlemen and regulations, and strict KYC norms, which eventually were bringing customers a lot of irritation and discomfort while making transactions. And, the blockchain technology actually alleviates all that.
How Blockchain Technology Is Disrupting the Banking Industry
The arrival of Cryptocurrencies: Bitcoin, being the first cryptocurrency that originated in 2009, changed the whole digital transaction landscape, as it was the first decentralized cryptocurrency that emerged out of nowhere and got popular within a very short duration of its inception.
Following its popularity and success, various other similar cryptocurrencies soon populated the cryptocurrency world, such as Ethereum, Litecoin, Namecoin, Swiftcoin, ripple, Primecoin, dogecoin, Dash, Zcash etc.
Why Cryptocurrencies Got Popular: The essential nature of blockchain technology that eliminates the middlemen(bank) and the commision(cost of transactions) that banks charge while performing transactions on our behalf made cryptocurrencies popular.
Cryptocurrencies are basically digital currencies that do not exist physically. Besides, another big reason why blockchain transaction management(digital transaction management) got popular is the leverage it possesses in terms of international currency exchange.
If you are business that deals internationally, then blockchain could help you in lot many ways that you could possibly imagine. Let’s discuss those advantages:
Security: Blockchain is a cryptographic ledger that digitally records all your transactions and assign you a timestamp for every single transaction processed. These records cannot be altered and hence, get saved digitally on this platform in the form of blocks, hence blockchain.
No stringent rules for KYC.
No middlemen or government intervention, hence zero cost for transaction processing.
No waiting for the transaction to happen, when the money needs to be transferred across national borders. Instant transaction processing.
How Exactly is Banking Industry Getting Affected
If Harvard Business Review were to be believed, Blockchain is going to do the same for banking, what internet did to media.
“And, as of 2016, 60% of firms that dealt in finance, found blockchain to be the best alternative to perform international transactions, 23% said that blockchain seemed to them as a perfect platform for security clearing and settlement, and 20% said they would utilize blockchain platform to perform KYC and to keep an eye on money laundering.”
What is Making Banks Globally To Realise The Practicality of Blockchain
In the past five years, major banks all across the globe have realized the importance of this technology, and are quickly adapting to it. A few of them are busy creating their own cryptocurrencies so as to be relevant in the upcoming future too.
Many others are seeking help from various leading ICOs and cryptocurrency firms. As they know, that their existence is in danger.
The few primary reasons, the conventional banking structure happens to be under the scanner, are:
Regulatory Environment That Keeps Changing.
Super-low Interest Rates.
Disruptive Digital Boom.
These three reasons have the requisite potential to cost financial firms globally, $300 billion by 2021. But, the point to be noted over here is that, it is not just the disruptive environment(digitisation) that is making the banks suffer, but, also the gigantic and mind-crippling processes and regulations been laid out for international payment transfers. Also, the time that goes into a conventional bank transaction processing, discourages people from opting for conventional banking(especially, businesses).
Some Interesting & Worth Sharing Stats That Shows You The Real Power of Blockchain
Every year, businesses worldwide are sending around $150 to $300 trillion worth of money across national borders. Here, utilising blockchain can save you that 10% commission you pay to banks for transaction processing (in case of international transactions).
Money transfer across national borders, usually takes in between 2 and 5 working days. With blockchain, it’s a matter of a few seconds, or maximum, minutes.
To maintain KYC records and in identity management, currently, financial institutions worldwide, spend around $60 to $500 million. With blockchain, these costs could be avoided in a significant manner.
The Bottom Line
You cannot avoid the /change, the blockchain technology, brings it to you. Whether you are a business, or just an average citizen in any part of the world, blockchain will come after you, and will certainly affect your lives in one way or the other, no matter how much you to avoid it.
The sooner, one realises its importance, the better it is, especially, if you run a business that caters to customers across borders.
For banking industry, in particular, the stats collected by various research agencies till now, that have been intensely involved with tracking performance of cryptocurrencies in the last five to eight years, present before you a clear perspective of the disruptions that are already visible, and the ones that will show up in the near future, sooner or later.
It’s high time that banks all around the world, adapt to the change, or they will not be found existing in next ten years or so.