Professionals within the financial services industry have been speculating about blockchain’s potential for years now, waiting to see how the up-and-coming technology might one day impact business. Blockchain is already a buzzword. However, according to a recent IBM survey, 91% of banks are investing in blockchain solutions, and 66% of institutions are expecting to be running at scale with blockchain. It seems that blockchain is finally poised to shake up financial markets in a way that will benefit both consumers and financial institutions.
In the next few years, the use of blockchain in finance will likely become common across the board. Here’s what your organization needs to know to get involved.
What Is Blockchain in Financial Services?
Most people know the term “blockchain” in relation to the cryptocurrency Bitcoin. However, mainstream financial institutions have started to use blockchain technology without Bitcoin to make their own transactions more efficient and secure.
Blockchain is essentially a ledger of recorded financial transactions. This ledger is distributed, published, and stored in multiple locations. When a transaction occurs, it is added to each copy of the ledger. This helps ensure an accurate record of transactions.
Because there are many copies of the ledger, blockchain is practically immutable and highly secure — to alter or falsify any part of the record, a hacker would have to change every copy of the ledger simultaneously, which would be extremely difficult to pull off.
What Are Some Common Blockchain Applications in Finance?
It’s easy to see how blockchain’s properties make it ideal for financial applications. Blockchain facilitates safe, easy transactions, and builds trust between trading partners. It can even be used to quickly identify individuals through digital IDs.
Banks and other financial institutions are already using blockchain to optimize their services, cut back on fraud and reduce fees for customers. Here are five blockchain financial services use cases gaining traction in the industry:
- Cross-border transactions: Transferring money across borders has traditionally been slow and expensive, since systems typically pass through multiple banks on the way to the payment’s final destination. When used for cross-border transactions, blockchain can make the process faster, more accurate, and less expensive.
- Trade finance platforms: Trade finance is another blockchain application in finance to watch. Many banks are using blockchain trade finance platforms to create smart contracts between participants, increasing efficiency and transparency, and opening up new revenue opportunities.
- Clearing and settlements: The accurate recording capabilities of blockchain may one day make current clearing and settlement procedures redundant, resulting in faster transactions and reduced costs for financial institutions.
- Digital identity verification: Blockchain is enabling banks and other financial institutions to identify individuals using blockchain-enabled IDs. When customer identifying information is secured using blockchain, banks can increase public trust while protecting against fraud and speeding up the verification process significantly.
- Credit reporting: Credit reports dramatically impact customers’ financial lives. Blockchain-based credit reporting is more secure than traditional server-based reporting, as demonstrated by recent data breaches. Blockchain may also enable companies to take non-traditional factors into account when calculating credit scores.
Learn How Hydrogen Molecule Could Help You Implement Blockchain Technology
Hydrogen Molecule is an innovative platform that allows you to add financial blockchain components to enhance any application. Modular and highly scalable, Molecule integrates with a variety of systems and third-party tools.
Whether you want to improve your institution using blockchain for digital identity verification, tokenization, or crypto payment options, Molecule is an out-of-the-box solution capable of meeting your needs. To learn more about how blockchain and the Molecule platform could transform your operations, contact Hydrogen online today.