At Bosphorus Summit 10 in Istanbul, blockchain consulting company BlockchainArmy chairman and Co-founder, Erol User was one of the high profile panelists of the blockchain discussion at the Summit, where he concluded the discussion with a thumping applaud.
The discussion was focused on the potential blockchain application in the finance industry.
The panel was graced by several eminent experts from the industry, including Mark Mobius, an Emerging markets fund manager and founder of Mobius Capital Partners LLP, Peter Von Dam, CEO of Coinarmy, UN Blockchain Expert, Prof. Massimo Buonomo, Prof. Aziz Akgul Chairman of Microfund Foundation.
Blockchain Revolution in the Finance Industry
Today almost half of the Finance industry is highly vulnerable to fraud and financial breaches. This is because it still uses outdated systems and practices old models that are centralized and exclusionary. The old practices largely depend on heavy paperwork, due to which this industry faces heavy losses in terms of additional expenditure in charges and a longer period for operations.
For cross border operations, the banking industry relies on financial intermediaries, which charge heavily and consumes a longer time to clear the transactions. The consumers have to refer to various financial analytic agencies for the market reports, as well.
The blockchain technology offers a viable solution to all these loopholes. In recent years, the Blockchain industry has been on the boom and has managed to raise $600 million in finance in the single year 2016.
As per the official reports in 2015, blockchain technology can reduce high infrastructural costs and the security trading banking sector might reach up to the US $15 to $20 billion by 2022. Owing to the above reasons, the banking sector should explore innovative blockchain technology.
NASDAQ and ASE
Financial institutions have to spend heavily on cybersecurity, financial frauds and thus have to hire ‘Know your customer regulations’ (KYC) services for a customer background check. So several big institutions including NASDAQ and ASE, are deploying blockchain to increase overall efficiency and reduction in operational cost.
In Insurance Sector
Blockchain technology can change the face of the insurance industry entirely, as well. All the tedious paper processes, including policy taking, payments, filing claims after maturity of policies, etc. can be eased down through blockchain technology. The legal contracts process can also be changed.
Scope of Blockchain in Finance
To overcome risks of financial fraud
As the banks are still operated on the age-old operating systems with a centralized database, they are highly vulnerable to severe cyber-attacks and financial irregularities. Blockchain provides practical solutions to reduce these risks at lower costs.
Low Operational Costs
The decentralized system in blockchain reduces the operational charges of cross border payments. Also, the essentiality of the centralized authority will be reduced for the agreements during the transaction validity period.
Instant Settlements and Improvement of Capital Optimization
The existent system takes two to three days to settle the entire transactions, which is a hindrance in spot trading. The peer to peer feature in blockchain technology reduces the significance of intermediately bodies’ including the brokers, custodian banks, and clearers and thus, cut down the operational costs and increases the speed of the operations.
Improves Contractual performance and offers more Financial Solutions
The smart contract feature of blockchain is highly beneficial for the banking sector to improve its contractual term performance.
With offerings of ICOs and digital tokens and exchange of cryptocurrencies, banks have more to offer to raise funds.
Blockchain technology thus has great potential in the Banking sector due to its innumerous features that are beneficial for this sector.