As of now, Blockchain technology is in its initial stages however we cannot deny the immense potential that it holds in the future.
It is expected that in the coming days this technology can bring in a total digital transformation the extent of which cannot be imagined as of now.
However to understand that we first need to… do a careful analysis of what this technology is all about. The blockchain technology is decentralized and this removes any restrictions from any private authority.
All data that is present in the system is encrypted to present a unique identity and once that has been posted you can not in any form change or delete the same.
This leads to a high level of accountability and reduces chances of any data getting breached. Users get the right to view and monitor all the information and this provides a transparency which is commendable.
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Blockchain technology and its beneficiaries
This technology stands to benefit almost all the industry verticals however one industry which is the prime beneficiary is the Finance industry.
Our economy suffers from many issues all due to corruption, bad governance, and money laundering. However, these issues can be quickly removed if we somehow are able to increase transparency, accountability and data security in our procedures factors which are easily achievable by use of blockchain technology.
The question that arises though is how blockchain can influence the finance sector. Its answer lies in how the technology of blockchain operates.
Blockchain technology essentially works on the concept of smart contracts. According to it, a particular transaction can take place only if certain pre-decided requisites are met and the network finds it ok to approve the same.
For example, in the class, PNB and Nirav Modi scam a loan worth crores were given and the regulators and bank authorities had no idea about it.
If blockchain technology had been implemented then PNB would have set conditions that no loans would be provided until unless seniors give an approval and RBI also receives an auto update.
In case any other dubious transactions would have come forth they would be marked with a red flag and RBI be notified of the same.
Instead of expecting other third parties to monitor the working this technology itself would have the ability to provide an accountability which helps in building a secure network.
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Eliminate any Fraudulent Activities
A company loses a lot of money thanks to the middlemen who act as a big operational cost. Such middlemen may indulge in any dubious activities thereby making the financial institutions prone to more losses.
All the banking systems of the world usually operate on a centralized data network. This network always remains under the threat of a potential breach or attack.
Once the whole network is exposed all the data becomes exposed to the mercy of such hackers. On the other hand, the blockchain network is actually a distributed ledger where the data present has been aligned next to each other in the form of blocks.
If one wants to hack this information he will have to enter all the computers of the world at the same time which in practicality is not possible to do. This makes this technology a stronghold fort which can actually help these financial institutions face any crimes.
Another advantage that financial institutions get is the ease of availing banking services. Even people based in remote locations can use banking facilities and services without having to go to any bank offices.
Even in case of rural set up the bank can create a network and users can use the service after verification of identity. Most banks and financial institutions are already in the process of implementing this model and once that is done it would be a blessing for poor nations as their business and international trade would get a chance to grow many times.
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Help remove hurdles faced in KYC management
In particular Indian financial sector stands to benefit a lot from the use of blockchain technology. The biggest hurdle being faced these days is managing the KYC information i.e. collection, storage, and verification of data.
If we can carry out this entire process on blockchain the data that we receive will be secure, devoid of errors and permanent.
All the barriers that have arisen because of bureaucracy and existing corruption will be broken. Also, this will pave the way for efficient use of funds, charities and government aid that is provided.
When such a transparent method of transacting will be implemented the outlook of people would also change and the poor and needy would receive what is due to them.
It goes without saying that if blockchain as a technology is implemented then the procedures in which transactions are carried out will be quickened. This technology is also capable of making manual processes automatic and this controls the authority of usage and hence removes possibilities of any errors happening.
Blockchain Magnets provides general information about financial products and services that should not be construed as financial advice or recommendations of particular financial products or services. It is advisable to obtain appropriate advice from an appropriately authorised financial planner or investment adviser before making any investment decisions or before purchasing financial products or services. Read more here .