Technology has been the major force behind economic progress since time immemorial, but it’s also the reason why some big names in various industries are threatened by how it may impact certain business affairs. Consider the case of blockchain technology that’s popularly known in cryptocurrency platforms; there are experts who think that it will significantly revolutionise the traditional banking system.
This foresight has its own merits as the evolving crypto market has already disrupted many financial transactions across the world. Millions of people are now shifting to this new trend as the technology proves advantageous in simplifying e-commerce processes and even those in real-world business. But like other developments, blockchain comes with its own drawbacks, too. There are security issues hounding the crypto network despite the tight security protocols.
Still, the gains outweigh the risks associated with crypto investing. Traders and investors are aware at the beginning that this market is highly speculative and unpredictable. For those who don’t, it might be a thing to consider, once and for all. Beginners should also choose a user-friendly trading system like the one provided by Bitcoin Evolution.
Yet with blockchain technology facilitating these financial transactions, users are guaranteed transparency and security. The question as to how it will continue to revolutionise the banking system is discussed below for your advantage.
Banks Have Recognised Blockchain’s Potential
From the perspectives of various banks around the world, a blockchain is a potent tool that can disrupt a number of financial transactions. Its application is wide-ranging from simplifying to hastening processing times. For those who are not familiar with the technology yet, it’s basically a tamper-proof system of distributed ledgers that underlie cryptocurrencies.
Today, there are large financial institutions, including investment banks, stock exchanges, and central banks, working on their respective blockchain-based innovations to keep up with the trends. These entities have publicly announced their interest in the technology. While not all consumers are not aware of this ongoing development, they may be able to observe its impact on the following transactions.
- Payments and Remittances
Certainly, the most obvious and basic application of blockchain technology lies in the payments system. Thousands of cryptocurrencies are now being used as digital money and a method to send payments around the world. These transactions are more practical and faster as the process requires only an internet connection to complete. In terms of remittances, the blockchain-based system eliminates the drawbacks of higher fees, slow processing time, and legal and tax issues.
- Secondary Market Trading and Clearing
Purchasing a company’s shares and swapping it over-the-counter currency would generally require clearing and settlement for trades. The ownership and contract of assets being traded should go through verification and be recorded. With blockchain technology, the exchange and clearing fees can now be added to the cost of each trade and become sizable over time, given a large number of orders.
- Account Balances and Deposits
Banks are commonly used by consumers to hold deposits in checking and savings accounts. The problem is, the deposited money in the account is made part of the fractional reserve banking. This means that most of the money you can view in the account balance is not actually held by the bank. It’s a different story when it comes to blockchain-based ledgers because the accounting entries are represented accordingly. It guarantees security, accessibility, and cheaper maintenance of accounts.
- Primary Market Issuance and IPOs
Not only secondary market trading can exist on blockchains, primary markets, too. Many companies are seeking to raise capital through initial public offerings. This strategy can be very expensive and may require an investment bank. The practical option is by issuing company’s shares directly to the blockchain, where they can be sold in exchange for money. Eventually, the digital shares can be exchanged on secondary markets through blockchain. Industry experts believe that this could be a huge disrupter to the asset exchanges and the investment banking industry once accepted by the public.
Conclusion
It is obvious from the foregoing facts that blockchain technology is more than just about cryptocurrencies. Many financial sectors have recognised its potential to reduce costs and streamline financial transactions. These are enabled by its tamper-proof, decentralised, and immutable characteristics.
As consumers may have observed, the technology has already brought substantial developments to the traditional banking system, and this may likely continue in the coming years.
