Harnessing Blockchain for Crypto Friendly Banking Solutions
Blockchain and Cryptocurrency: Redefining Digital Banking
Cryptocurrency is emerging as a disruptive force with huge potential to drive faster, cheaper, transparent, and more secure transactions. Bitcoin, the first cryptocurrency was introduced in 2009 to empower individuals and organizations to process transactions without any financial institution or third party, using algorithms and consensus to verify transactions. Fast-forward 11 years, and cryptocurrency has gained significant adoption across various industries around the globe – banking being one of them. Many financial institutions and start-ups are betting on blockchain – the underlying technology for cryptocurrency – to provide crypto friendly banking solutions to their customers.
The traditional banking industry has various time-consuming and expensive processes across the banking lifecycle. Blockchain is revolutionizing banking by providing ingenious solutions to customers at lower cost, higher security, and greater speed. With its distributed ledger system, blockchain accelerates transactions while ensuring an immutable audit trail. In addition, blockchain provides a secure solution to transfer and store digital assets while eliminating third-party involvement.
Here are the processes ideal to crypto and blockchain-driven transformation:
· Customer onboarding and identity management
Customer onboarding involves know your customer (KYC) and anti-money laundering (AML) checks across various departments. The process needs to be highly-secure to safeguard users’ sensitive data. Unfortunately, the conventional identity management process is plagued with a problem called identity theft. Millions of people become victims of identity theft every year – the number was 15.4 million last year. Another pain-point of the traditional identity management process is its effort-intensive mechanism that leads to duplication of records.
Blockchain can streamline customer onboarding, making it more efficient, user-friendly, secure, and less vulnerable to fraud. Financial institutions, enterprises, and start-ups offering crypto friendly banking solutions are leveraging blockchain-based identity management to accelerate the process and save significant cost and effort for themselves as well as their customers.
The current process of cross-border payments requires a central counterparty to perform transfers using SWIFT (Society for Worldwide Interbank Financial Telecommunications). This leads to higher transaction processing costs, the need for third-party entities, and significant delay in settlement.
Blockchain helps simplify and expedite payment transactions while reducing transaction costs. However, banks need to collaborate with a technical partner to create a backbone network for global payments or join an existing network. Such a network can reduce the transaction time from a few days to real-time.
· Clearing and settlement
Blockchain helps alleviate the operational cost and facilitates real-time transactions between financial institutions. It offers benefits, such as minimum latency in settlements and better transparency and security. Those serving as crypto friendly mobile banking solution provider are harnessing the potential of crypto and blockchain to ensure faster clearing and settlement for their customers.
· Smart contract management
A smart contract, also known as a self-executing contract, consists of the rules and regulations related to an agreement, just like a traditional contract. Smart contracts automatically enforce the in-built guidelines as soon as an event is triggered.
Smart contracts enable financial institutions that offer crypto friendly banking solutions to automate and manage processes line loans, credits and mortgages, trading, and more.
· Loan, credit, and mortgage
Blockchain-based smart contracts can transform the way loans, credits, and mortgages are managed. They create a shared copy of an agreement with an auditable trail. This simplifies the process of releasing funds while ensuring faster settlement and transfer of titles and better traceability.
Blockchain is disrupting the banking industry. Financial institutions, established enterprises, and start-ups are realizing the power of blockchain and cryptocurrency and are offering crypto friendly banking solutions to better serve their customers. These solutions offer benefits like lower costs, reduced settlement time, transparent and secure transactions to customers, along with benefitting the service providers with greater value, thereby creating a win-win situation for both customers and those offering these services.