Blockchain Technology and cryptocurrency are the hot topics of all time nowadays. They have been here for around a decade now while affecting almost every world sector. Hence, the banking sector is no exception, https://btcrevolution.io/.
Though a lot of people are unaware of blockchain technology and its importance, it is not stopping them from investing in it. The relationship of blockchain technology with banks has portrayed itself as an enthralling and often controversial topic. There have been multiple debates about the merits and demerits of this relationship. Economists are of different opinions about whether it is advantageous or disadvantageous for the banks.
Blockchain technology can notably lessen the costs of processing and transaction. Hence, banks can save billions of dollars. Also, blockchain technology offers security and permits banks to lower the funds that are directed towards systems of security and maintenance. It is, thus, another way of saving quite a lot of money.
However, blockchain technology can also prove troublesome for banks. Blockchain technology is portrayed as a technology that removes intermediaries between financial transactions as its primary objective. Hence, they aim at removing the intermediate bodies that charge a transaction fee for easing transactions. Though hypothetically, it poses a danger to the revenue stream of banks. Moreover, multiple financial technology start-ups who are seeking to become full-grown banks are attracted by the ability to initiate a bank at relatively low costs.
So, if there is a probability of losing so much, why are banks still enthusiastic about blockchain technology? There are multiple reasons for taking this risk. The adoption of block chain technology by the banks has prospective advantages for them. It also influences some of the fundamental functions performed by the banks.
As stated earlier, blockchain technology eliminated the requirement of intermediaries to facilitate financial transactions between two bodies. Moreover, cryptocurrency transactions reduce the transaction time remarkably, while normal transactions take various days to settle.
Ease in payments is a significant generator of revenue for banks as well. Block chain technology is deranging this plan by providing a low-cost alternative to perform transactions without the requirement of an intermediary. Blockchain technology, used by cryptocurrencies, utilises a general, decentralised record, available to almost everyone to perform transactions. As a consequence, it removes the requirement of a third party, no matter how trusted, to substantiate transactions.
Blockchain technology removes the backer in the industry of loan and credit. It makes borrowing money more reliable and gives lesser rates of interest. Credit or loans are provided by banks on various points like the income-to-debt ratio, credit score, and status of asset possession. It is, hence, seen as an imprecise and uncertain system that usually negatively affects borrowers. However, borrowers can apply for loans based on a global credit score by using blockchain technology. It puts forward an inexpensive, well organised, and more assured way of providing credit to the borrowers.
Block chain can lessen the costs of operation and implementation of real-time transactions between financial entities. Before reaching the respective account, the bank transfers have to go through a complicated arrangement of intermediaries, which consists of banks and other custodians. Different ledgers of the banks, both origin, and destination, would then have to be accommodated at the end of the day. It must happen between a global financial system of multiple financial institutions, comprising traders, funds, and managers of assets. Every intermediary grants a cost factor to the transaction and adds a likelihood of failure of the transaction as well.
On the contrary, block chain technology utilises a decentralised record of transactions that is available to all members. It reduces the requirement to accommodate the ledger of every member because it keeps a record of all transactions publicly and transparently at the same time. So, instead of going through an entire network of custodians and intermediaries, transactions can be resolved directly on blockchain technology. It lessens the maintenance costs of a global network of correspondent banks.
Because customer experience, which is given by banks, has long been a grievance for various people, blockchain technology proves to be an added advantage of better services and hence, merrier customers. Hence, blockchain technology and banks, if they work hand in hand, can provide various benefits for customers.
