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When it comes to the economy, the financial sector is the most crucial part because it can provide the liquidity required for businesses and individuals. The key players in the financial markets are their banks, which is indeed a global industry.
The banking system was created with the purpose to build a community of people who can interact safely through marketing and exchange. Blockchain technology has an innovative way to facilitate all the financial sector operations on a global basis.
Blockchain technology has caught worldwide attention, and its potential cannot be neglected in the banking sector. People are looking for opportunities to adopt the benefits of blockchain into various industries, and the finance sector is also not left behind. It is said that the banking sector will soon find massive growth within five years due to the involvement of blockchain technology.
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Talking about the involvement of blockchain in the banking sector, it is gradually gaining popularity to store considerable amounts of data on the cloud.
Banks are known to make transactions, and they make transactions by carrying out lots of agreements. Now, the problem with the current processes is that they are lengthy and cumbersome. Additionally, the processes cost a lot to the financial industry.
If blockchain technology is used in the finance sector, then the costs of several processes can be reduced, and it will become less time-consuming. Not to forget that blockchain can impart new revenue opportunities in the industry with reduced errors.
1. Payments- The foremost use case of the banking sector is making payments. When we consider blockchain technology in the finance sector, payments can easily be made across cross-borders. Additionally, the payments made by using blockchain are comparatively cheaper and faster.
2. International trading- Not to be confused with the stock exchange, international trading is the exchange involving goods or services among two or more countries. Notably, a lot of paperwork is needed for international trading, and doing it online takes considerable time. Hence, blockchain technology can eliminate the paperwork and help to streamline the trading process.
3. Stock exchange- In the traditional stock exchange, many intermediaries are involved in buying and selling stocks. For instance, for trading, a broker matches the transaction of a buyer with the seller. The transaction is then forwarded to the central counterparty clearing house to manage risk. The use of blockchain in the stock exchange can potentially eliminate the requirement of all the intermediaries and can facilitate the transaction across the world.
4. Money lending- It is a process where loans are made available to individuals by banks. In a standard scenario, banks might take several days to process the loan. But, with the use of blockchain technology, complicated procedures can be eliminated.
5. P2P transfers- In today’s time, people often use online transactions for peer to peer transfers from their bank accounts. Although it is pretty easier today to transfer money, it still has its limitations and blockchain technology can potentially allow P2P transactions at a global level, that too with reduced restrictions.
Although it will be challenging to say whether blockchain can completely replace the finance sector, it indeed has a great potential to disrupt the banking sector. The future is unpredictable, and seeing blockchain technology creating an entirely new financing system, will not be a wonder.