MARKNetwork Blockchain Use Case: Banking

Application of Blockchain technology in Banking Industry

Short summary of the article:

“Do not get left behind!”

»Global commercial banking industry has recorded a revenue generation of $2 trillion in 2018. As the industry is growing at a rate of 1.6% annually, technology issues, risks and regulatory impacts are also becoming pronounced. Is blockchain a solution to all these challenges? Let us dive deep to understand.«

How Blockchain is transforming the banking industry?

A Blockchain in simple words can be defined as a digital ledger of transactions which is shared by a distributed network of computer units. The digital ledger allows each network participant to append transactions without the control of any centralized organization.

 

Blockchain’s first use case was to verify financial transactions in an expedited manner without the role of any central authority. Taking advantage of the Blockchain architecture, the banking industry is looking forward to replacing the legacy systems in place to bring in efficiency, speed and cost saving. Cryptography renders immutable security to the Blockchain which is much desired in the banking space.

 

Let’s look at the industry perspectives:

  

Fraud Elimination

American Bankers Association Fraud Survey Report recorded banking industry frauds of $2.2 billion in 2016. The legacy centralized database of banks is susceptible to cyber-attacks as acknowledged by Christopher Mager of BNY Mellon Treasury Services. As all the customer information is secured by IT systems that hackers can bypass, data breaches are leading to frauds.

 

Blockchain’s decentralized architecture works in stark contrast to the traditional system. As the digital ledger is immutable, transparency can be maintained without any scope of the fraud. The Blockchain transactions are executed and verified in real-time by the network of computers recording every bit of data in its immutable digital ledger.

 

Any malicious attempt to alter this data is made obvious by the Blockchain as it is recorded and can be used as evidence of fraud. Banks will have to work in compliance with regulatory bodies to develop and use Blockchain. On 30 December 2015 Nasdaq created history on 30th December 2015 when it made a share trade using Blockchain platform. As Nasdaq acknowledged the current IT infrastructure of the banking industry is plagued with soft-spots for frauds, Blockchain can reduce the risk significantly.

KYC- Know Your Customer

Duplication of KYC efforts and an average window of 30 to 50 days to complete the KYC process makes Banks spend massive amounts of £40 million – £300 million annually to stay KYC compliant. Record-breaking fines were levied on banks in 2015 who missed remaining compliant.

 

As a global standard for KYC compliance is missing, the matter becomes even complex. Blockchain experts suggest KYC assets be stored on Blockchain and reused by the banks, insurers and loan providers without impacting the customer services. A KYC blockchain will ensure these entities have access to standardized KYC data globally which will reduce the administrative burden and costs. Any changes to the data will be notified to the entities using the Blockchain in real-time promising higher security and privacy throughout the ecosystem. 

  

According to a study conducted by Goldman Sachs, banking industry can save $160 million as annual headcount cost, $420 million as annual training cost, and $2.5 billion as annual operating cost and $0.5 – 2 billion as annual AML penalties.

Payments

Blockchain has a potential role in facilitating payments. The existing payment systems are under tremendous pressure by the customers from the aspects of speed and security of payments. Christopher Mager of BNY Mellon recognizes the potential of blockchain by offering operational efficiencies, speed and cost saving. Ripple Blockchain claims to help banks reduce 33% of operational costs involved in processing payments across the international borders in a secure, and instant manner. Banks have started experimenting with the aspects of Blockchain.

 

According to the latest estimates, Blockchain technologies can reduce the infrastructural cost of banks’ by $15-20 billion annually by the year 2022. 

 

This major adoption needs the stakeholders and regulatory bodies of the banking industry to work together and build a scalable solution to address all the issues. MARKNetwork Inc. Blockchain Solutions plans to introduce innovative Blockchain technology solutions to the new age banking industry. With Blockchain fueled solutions MARKNetwork will help bring in decentralization to the banking operations and plug the existing vulnerabilities that lead to frauds amounting to billions of dollars annually. 

 

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