By combining shared databases and cryptography, blockchain technology allows multiple parties that remain unidentified each other from various geographical locations for having simultaneous access to the frequently updating digital ledger which cannot be changed. The blockchain is basically a dominant technology that allows the Bitcoin, Dogecoin, Litcoin and other virtual currencies to be secure, anonymous and open. They are essentially the database on all Bitcoin transactions in detail. Normally recognized as a public ledger, the log consists of metadata on when and how each transaction is performed. The ledger can be accessed publicly via APIs and various torrent sites. The databases are cryptographically secured in order to prevent interference with present and past transactions.
The cryptography can edit only the blockchain parts that they own by acquiring the private keys that are required to write to the file. This also helps to keep everyone’s copy of the blockchain that is distributed in sync. The blockchain implemented in banks will save billions of money by dramatically decreasing the processing costs. Banks are always ready to utilize the opportunity to decrease the transactional costs and reduce the amount o paper which they process. Thus blockchain implementation will be a perfect step that can enhance the profit and value of the banks.
The major banks try to experience the benefit of blockchain that is useful in money transfers, record keeping and other functions. The application of blockchain transforms the finance process of paper-intensive international trade to the electronic decentralized ledger which enables to have complete access to a single source of information for all participating entities including banks. This also enables them to track the entire documentation and evaluate the asset ownership digitally like un-alterable ledger in real time.
Given below are the ways in which the BFSI sector is benefited through the blockchain
Reducing fraud attacks
The blockchain is referred to as the latest technology which reduces fraudster in the financial sector as 45% of financial mediators in money transfer services and stock exchanges are exposed to financial crimes regularly. Many of the banking systems in the world that are built in centralized databases are more susceptible to cyber attacks as the hackers get the entire access easily once they hack them. The blockchain technology will help you to avoid the current crimes committed online nowadays in the financial institutions to a great extent.
Know your Customer (KYC)
According to the significant survey conducted by Thomas Reuters, many of the financial institutions spend 60$-500$ million per year for Know Your Customer (KYC) and the customer due to diligence regulations. Such regulations help to reduce money laundering and many terrorist activities by having the needs of business in verifying and identifying their clients. Blockchain enables an organization to have access to the verification details of its clients by other organization and thereby avoids the repetition of the KYC process.
Having smart contracts
Blockchain aids smart contracts as they aid the storage of any type of digital information that includes computer code which can be implemented once two or more parties enter the keys. Contacts can be created and financial transactions can be implemented when the code is programmed depending upon the set criteria.