Blockchain is a technology that has been in existence for years, and it became known in 2008, thanks to the appearance of Bitcoin, which today is the most accepted cryptocurrency with the highest value in the market. The Blockchain (chain of blocks) works as a “database and backup”, it could be called “the great book of digital events” shared between many parties. These blockchains have the characteristic that they can only be modified or updated through a general consensus, once the modification is approved it cannot be deleted, which means that if we change any record in a computer that has a part of the Blockchain will automatically synchronize with the rest of the network, likewise, if one of the nodes of the chain disappears from the network, its integrity would not be affected at all.
For now, one of the main applications used today is to create company databases. Blockchain puts the information in safe custody, in several blocks. In more technical words, the Blockchain is a decentralized line of accounting, which allows a shared set of computer systems to accept a transaction between several parties, certifying its authenticity.
Advantages of Blockchain technology
In the banking sector, Blockchain technology has its advantages at the time of its applicability, so we see how it contributes to the optimization of some aspects of business or of banking itself, through alternatives, such as smart contracts, the negotiation of actions, and identity management, among other alternatives. This data storage and transmission technology have great potential in the financial and banking sector, below we share some of its advantages:
As this technology does not require intermediaries, it enables peer-to-peer transactions, significantly reducing banking operating costs, greater transparency between financial institutions, and improving central bank monitoring. All operations are registered in the blockchain and can be tracked in real-time.
Online identity management
Thanks to this technology, users can register in the blockchain and use their personal data for any service, but always guaranteeing privacy in the handling of their personal data and the correct use of the information generated in the transactions that perform.
Reward and loyalty programs
The benefits of Blockchain also go through the traceability and transparency of its operations, a feature that allows banks and insurers to impose a “transparent” loyalty and reward program that adapts to performance management, 24 hours a day and 7 days a week, weekdays.
The Blockchain allows a “testament” of the heritage to be drawn up digitally. Smart contracts have the ability to comply automatically after the terms have been agreed between the parties. Logically, there must be voluntary consent between all parties, the object of the contract (good or service), and a just, lawful and true cause. Smart contracts are computer programs, they are not written in natural language, but in virtual code programmed for compliance.
Simplicity in payments
The process of cross-border transfers has been characterized by being slow and expensive, with Blockchain technology, costs can be reduced and transfers significantly accelerated, the agreements are almost instantaneous, lasting from seconds to a few minutes, concerning settlements that currently last up to weeks. Therefore, with blockchain technology, banking transactions can be more agile and effective.
Each operation that is carried out using blockchain technology is documented with unique records, which allows any user to access the network. This allows any update made by users or record that is edited to be documented in history, likewise this system allows more transparent and effective internal audits.
With blockchain technology, banks will be able to save costs in paperwork, human resources, and reduce significant expenses generated in transactions, which contributes directly to their profitability and effectiveness.
What do you think about this topic? Can you mention any other advantages of blockchain technology for the banking sector?
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