Blockchain technology has been making headlines ever since its first successful implementation. Many people have started contending that this will be the future of the financial sector. At present the financial sector dominantly deals with two types of transactions—Cash or Digital. Depending on the country that you are living in, you will see that one of these mediums are popular. While cash involves physical transaction using hard currency, digital transactions involve payments made through credit/debit cards, net banking, applications, etc.
Why Is the Revolution Needed?
Almost all of the Hire Java developers and even some developing countries are currently reporting high number of digital transactions. There are a number of issues faced by both consumers and banks in the current financial set-up. Here is a list of few of these issues:
- Transaction Fees: Banks across nations charge transaction fees which is a vital part of their revenue generation. The transaction fee is charged on almost all electronic payments dealing with a substantial amount. For example, person who is transferring a sum of 2 lakhs to some other account using popular methods like RTGS or NEFT, etc. would be liable to pay a percentage of that to the bank. This transaction fee is almost always disliked by consumers.
- Fake Currency and Tedious Process: Every country faces the issue of fake currency and this is one of the unaccounted issues that affect the financial sector. Fake currencies that come into circulation if deposited in a bank can cause a substantial loss to banks. Additionally, banking sector has evolved a lot but still it relies on traditional methods of deposit and withdrawal which are tedious and time-consuming causing problems for both consumers and banks.
- Vulnerability: When we say financial sectors, we are primarily talking about banks which physical entities are run in collaboration with public or private sector. These financial institutions are not immune to issues like bankruptcy, insolvency, etc. This vulnerability poses a great threat for consumers who have deposited money in these banks and also for banks who are unable to maintain a healthy balance between credits and debits.
How Can Blockchain Technology Help?
Blockchain technology operates on cryptocurrencies in a decentralized network resolving almost all of these concerns. The cryptocurrency is called Bitcoin. The revolutionary technology operates on blocks that are approved by representatives on the network, once approved the blocks become a part of the chain that providing record that the transaction has taken place.
The main features that make Blockchain technology a hit or to say a solution for issues faced by financial sector are:
- Decentralization: This is an individual aspect that lends a lot of benefits to the banks. A lack of one central authority can offer greater authenticity in banking world because there are no influences from a biased person or entity. Decentralization also limits the need for huge infrastructure which banks need to maintain currently in almost every city in the world and saves them from insolvency and bankruptcy.
- Processing: Blockchain technology is as swift as the online mediums like the IMPS which allows users to send money from one account to another within no time but here there is no limit. Banking officials are not required to authenticate such transactions as the involved parties verify the information transparently. This means faster processing.
- Future-Ready: Blockchain also emerges as a future-ready solution because it seems to be solution to problems like fake currency. The investments that banks and organizations are making in this technology just proves how beneficial it can be for different sectors. It offers the security and at present claims to be hack-proof.
Looking at the ways in which Blockchain technology can help resolve the issues faced by the current financial institutions and the investments made in this technology, the future appears promising and it certainly seems to be the revolution that the financial sector was waiting for.