The blockchain buzz has been around throughout the year 2017 and the years before that. It is no doubt that this technology is completely transforming how people interact through finance, investment, and banking. Since there are few, if any, clear regulations on how to control or regulate the blockchain technology, most reputable banks see it as a grey area. However, blockchain is based on electronic ledger whose data can be encrypted, recorded, verified and traced over a network of computers. In the financial industry, blockchain will transform it in the following ways:
Since data within the blockchain is decentralized, not kept in one place, it helps to increase transparency. In the financial industry, such transparency is vital if you want to minimize fraud, which has engulfed the financial sector. Unlike the traditional banking system where all data is stored in a bank or within the bank’s network, blockchain decentralizes its data which increases transparency. In this case, it will be difficult for anyone to breach the data within a certain blockchain.
Instead of an initial public offering (IPO), startups can raise funds through launching ICOs. The blockchain technology helps startups to connect with potential investors which takes place online. A startup can raise the funds in seconds or minutes, it needs to fund a project, if done right. Due to the simplicity of the ICOs, startups will be able to convince different investors to buy the tokens of their projects in hopes of increasing in value over time. An IPO will have to adhere to regulations concerning launching an IPO which could take months before you can raise the capital you need for your company.
Fast money transfers across border
Before the blockchain technology, it took time to complete money transfers across border. You had to go through multiple regulations that govern how customers should transfer money from one bank account to the next. In such a banking environment, there is a central authority which controls how people transfer cash or make transactions across border. With blockchain technology, there are no middlemen or banks to delay the transaction regardless of where the sender or receiver of the cash is.
Improve data storage, recording and verification
The accounting aspect is taken care of when it comes to this technology. Data can be stored electronically which greatly minimizes the bulk of paperwork accountants or organizations have to keep in their records. Also, it records all the transactions carried out which can be retrieved with ease and in a secure manner.