There are several benefits of blockchain for banks. The advantages of blockchain in banking have helped financial institutions find ways to complete more secure transactions and reduce errors.
As a result, banks will want to consider using blockchain more often to better meet the needs of its customers.
Costs Reduced
One of the benefits of blockchain for banks is reduced costs. Banks have recently learned that blockchain can allow them to reduce infrastructure costs by up to $20 billion by the year 2022.
Implementing things such as smart contacts within a platform, banks can reduce the interactions with counterparties and intermediaries. They can also lower the cost of maintaining and executing contracts as well.
Banks can also reduce the transaction costs between bank to bank transactions.
Faster Transactions
Another one of the advantages of blockchain in banking is offering faster transactions. Any transaction can be done within a matter of seconds and slightly faster than other traditional methods.
Banks are now able to avoid middlemen which can allow them to ensure that customers complete transactions at a quicker pace. This will result in customers and banks able to complete and process more transactions.
Improved Security
Shared ledgers can help banks better secure transaction information.
First, they will be able to quickly complete a transaction and reduce the risk of someone either capturing transaction information or diverting payments.
Two security keys exist for each transaction. A public key is available for every user while a private key is shared between the parties of a given transaction. Data of a transaction is also unchangeable once it has been verified.
Improved Data Quality
Modern blockchain can store any type of data and allow it to be accessed following predefined rules and regulations. The technology known as smart contracts automatically verifies and enforces contracts.
By moving banking information into shared ledgers, the information then inherits the benefits of blockchain.
Digital Currencies
Banks can benefit from blockchain with the use of digital currencies. They are now able to accept digital currency to complete a variety of transactions. With cryptocurrency, banks will be able to more easily clear and settle financial trades faster and more securely.
Banks will also look to make digital currency as standard currency in the future.
Accountability
With accountability, banks will be able to benefit from blockchain by reducing fraud and misuse of company assets. With digitally generated transactions, banks will no longer have to worry about significant errors being made. They won’t have to worry about important information being fabricated with as well.
Blockchain makes all transactions easy to check and verify which will, therefore, ensure that banks accurately process transactions more consistently.
Compliance
Banks will also benefit from blockchain with better compliance. They can allow auditors and government official’s access to the blockchain. With this access, auditors and the government can see business unfold with complete transparency.
Banks can also intercept suspicious transaction activity and streamline the auditing process. Financial institutions - and fintech firms in general - are now able to provide digital information that is easy to find and save time with the auditing process.
Reduced Error Handling & Reconciliation
Blockchain has also benefited banks by allowing them to more easily reconcile transactions. They can trace transactions more quickly and find errors in a timelier manner.
This enables them to find errors before a transaction is completed. As a result, they will have the means to fix errors before they can cause a problem for the institution and their customers.