Blockchain is a distributed, decentralized ledger or record-keeping technology. Blockchain technology ensures the integrity, security of data, enables validation, replication and up-gradation of the records on the block through consensus. Owing to the property of immutable records and multiple levels of validation, blockchain is gaining recognition and is being widely accepted in the fintech industry. Blockchain is being used for maintaining records, payments and carrying out other banking and finance transactions. The cryptographic encryption ensures complete trust between the parties involved in the financial transactions. Some of the best benefits of blockchain for financial industry have been mentioned below
- Negating frauds and manipulations
Blockchain is the perfect antidote to any kind of cyber-attacks or intentions of manipulation of financial data. Let’s have a look at how blockchain works to do so
- A financial transaction is requested
- A block representing the transaction is created. Each block can be thought of as data set or information carrying a cryptographic hash of the previous transaction, the transaction data and the time stamp
- The block is then sent to different nodes in the blockchain network for validation.
- Then after validation, the block is added to the existent blockchain.
Now, if a slight manipulation is done in the financial transaction data, there is complete change in individual blocks and the entire chain of blocks which can be easily detected during validation at one of the nodes. So, changes of manipulation or change in financial data without authorisation from all the parties involved becomes almost impossible. This has resulted in the creation of smart immutable contracts for the financial industry raising the trust of customers, dealers, banker, cashiers and all.
- Ease of audit
Since the records on blockchain can’t be deleted or modified without prior permission of all the parties, all the data remains safe. This helps in regulatory compliance and audit of the process as more credible records are available for audits.
- Trans national payments made easy
By cutting down the paperwork and inducing integrity, blockchain aid cross border payment transactions and reduces chances of conflict, siphoning of funds and increase transparency in exchanges. Blockchain based transactions happen in real time. So recipients of the funds need not wait for days to receive it.
The end users or the parties involved need not worry about who are the persons involved in transactions every time. Blockchain allots a digital fingerprint akin to an actual finger print which acts as the access identifier. This digital fingerprint is encrypted and validated ensuring zero chances of forgery.
With blockchain being a complete online setup for transactions, global transactions have been simplified and geographic restraints of transactions have been negated.
- Ease of securities market
By tokenising of bonds, stocks and assets and putting them on public blockchain, more efficient capital markets can be created with distributed ledger system of blockchain.
- Easy loans and credits
By removing the gatekeepers in the process of offering loans and by negating multiple verification process, blockchain is revolutionising the entire loan and credit industry.