Introduction
With more and more enterprises believing and investing in blockchain, the technology is finding its way into various industry verticals. Banking and Investment seem to be the latest industry to adopt blockchain for its various benefits such as rediscovered efficiency, and smoother operational workflows. Be it defining digital presence or reinventing supply chains, blockchain is turning out to be the technology of choice to drive the digital economy for enterprises. This has led to a drastic preference for Blockchain Development Services by enterprises looking to develop blockchain-based software solutions. Here are five great blockchain ideas and use cases that are transforming the BFSI sector as we speak! But before that let's have a brief look at blockchain technology.
Blockchain is a decentralized digital ledger that is capable of recording transactions across computer networks. As the name suggests the blockchain network comprises different blocks which hold multiple transactions. These blocks store data in such a way that they cannot be modified without changing consequent blocks. This further extends immutability and security to transactions. Let us have a look at 5 different use cases of blockchain that are making waves in finance circuits.
5 use cases of blockchain in finance market
Fraud detection
Money is the greatest motivator of crime in the BFSI industry and the major chunk of this comes from the crowd involved in the industry and the employees themselves. Here blockchain comes in handy to detect malicious intent and prevent attacks on the integrity of the network. It deters cyberattacks on financial documents and assets. Fraud detection algorithms are often part of smart contracts that run timely fraud detection checks at regular intervals.
Financial document management
In an industry that revolves around security, traceability, and accessibility of transactions, blockchain comes as a boon for its users. Blockchain provides end-to-end security and traceability to financial documents while mapping every small change made to the document be it creation, editing, viewing, etc. It has contributed greatly to establishing faith between organizations in its security features.
Digital identity verification
With the rise of digital onboarding of enterprises, one can also observe the rise of identity theft. Every year, identity theft, especially in the banking and finance industry, costs enterprises millions, if not billions, of dollars along with reputational damage and loss of brand faith. However, blockchain networks employ several components like decentralized identifiers, embedded encryptions, secure transfer of identifiers, etc, which mitigate these risks. The tokenized digital identities and their storage on the blockchain network provide a single source of truth when it comes to verifying clients' IDs.
KYC/AML compliance
Finance service providers and organizations often find it difficult to maintain KYC/AML checks. Both AML and KYC are essential checks of identity and security in banking. KYC helps banks verify a customer's identity, documentation, and associated level of risk the customer poses. AML on the other hand refers to the regulations that are in place to control money laundering, fraud, and financial crime. Blockchain-enabled smart contracts automatically run these checks all the while eliminating the need of running time-consuming and laborious manual checks.
Payments and remittances
To talk about applications of blockchain and leave out cryptocurrency is a crime. Another fascinating and quite popular application of blockchain in BFSI is making payments and transactions in cryptocurrency. Cryptocurrency refers to a digital currency created by algorithms as a different mode of payment. Here, blockchain technology facilitates secure transactions and encourages lower payment processing costs for clients. Such transactions are not only quick but also more secure with fewer processing fees levied on it.
Conclusion
Many traditional banking organizations and involved individuals claim that blockchain employment in the BFSI sector is an overstatement of its true capabilities. This couldn't be more false. Blockchain is the future for the host of benefits it brings to the table, from document safety to fraud detection and mitigation. It is safe to assume most businesses of the BFSI sector would wish to future-proof their companies with Custom Blockchain Development to build decentralized financial software applications and drive individual growth in the financing sectors.
