Blockchain In Banking Industry

Blockchain in Banking Industry

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What is Blockchain?

Blockchain Technology-

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virtually everything of value”.

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A blockchain which was formerly known as Block Chain is a

list in which records are present in a growing nature known

as blocks. These blocks are interlinked and each of them

contains a cryptographic hash that is of the previous block

connected to it. This hash is the key or password, a

timestamp and transaction data is recorded in it.

As per Don and Alex Tapscott, the authors of the Blockchain

Revolution(2016), blockchain is defined as the “incorruptible

digital ledger of economic transactions that can be

programmed t record not just financial transactions but

Blockchain, in short, is a shared ledger decentralized and

resistant to tampering which provides access to the verified

contributors to store, view, and share the digital information

in a secured environment.

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transactions. It has reshaped the lifestyle and businesses since the 1990s.

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banking sector to explore its ways of preventing fraud and gaining security.

Adoption of blockchain technology:

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The development of the internet might get compared as of that to the blockchain. The internet as it is has

always been a boon factor for everything, be it a business or the whole market of social media and

The blockchain, on the other hand, is also one such factor which takes reshape the whole perspective of

the nature of business.

Not just this, it provides trust, accountability, and transparency when it comes to business relations for

providing the aiding benefits. These benefits are adopted by companies and businesses, especially the

Blockchain technology has yet not been leveraged by the whole market, but those who use it have claimed

the businesses to be a success after its adoption.

Blockchain takes the work further ahead of the previous and old formulas, driving the data and work

forward with vigour.

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•It is the biggest provider of solutions related to trust.

It prevents corruption of data in an agreed chain

transaction.

•It solves the issues of double-spending (a single

transaction cannot get recorded twice).

•Blockchain eliminated the need for intermediaries.

•Provides a frictionless transaction.

Common Benefits of Blockchain:

Prevents corruption of data

Prevent Double Spending

Frictionless transaction

Eliminate Intermediaries

Blockchain benefits

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Learn how Blockchain benefits businesses and

transactions in the banking industry:

• Blockchain acts as a game-changer for the banking industry, it not only prevents the frauds

from happening by providing its high level of security, but it also allows them to perform and

approve transactions in a matter of seconds.

• Blockchain provides cutting cost majorly and boosting the efficiency of the banking sector. The

smooth transaction is the added bonus provided by blockchain to the banking industry.

• If each bank in the network had the copy of the ledger and a common protocol and consensus

mechanism, it can benefit all the plus properties of the blockchain.

• In short, Blockchain in banking sector offers lower costs, security, privacy, and speed.

Blockchain provides profitability to the banking industry.


Ways in Which Blockchain prevents frauds in the Banking Indstry

Immutable

•The data or transaction once registered on the blockchain can not

be edited or changed in any way possible. The consensus is a term

that provides the allowance and permits the validity of the data to

be true and of required nature before the data is even listed on the

blockchain to send forward. All the participants or respondents

provide their consent before a data is set and transferred in the

blockchain.

•After the approval of the data, the block is provided with a

timestamp before which is linked or connected to the previous block

in the blockchain.

•This process makes the blockchain data of consent and an asset

from the very beginning. It can procure the data in terms of origin

making it of protective nature which can not be undone however

strong the fraudulent is of skills.


Distributed Networks

• The blockchain includes a distributed digital ledger containing the

data shared between systems and given consent on a regular

basis. The central authority in this is missing and the data is sent

forward with the consent ot everyone present in the members.

• The management and authorization of the data that is forwarded

is transparent leaving not even a single place for fraud. It is under

the authority of the members to process, check, and verify from

start to end.

• This is not just the case of the current data being transferred or

forwarded, but the data present in history also falls on the hands

of the members. So, the changes to be done on the data needs to

have access to the data and the access to the majority of the

systems in the network is the toughest task and is considered as

“out of the picture” question.


Permissible

• A blockchain network is created on the base of the allowances

and permits and non-permits depending on the type of

blockchain creation.

• The permission-based network of blockchain is one such

network which prevents the frauds to occur as the data is

completely under the control of the members present in

making and moving the data. This even prevents the access of

the systems present in the network and is also known as the

private blockchain.


Types of Frauds

Identity Frauds

•Considered as one of the serious and impactful issues,

identity fraud poses a threat to consumers across the globe.

Blockchain provides the security of the digital ID of an

individual that makes it protective in nature without any

proof of tampering.

•As to the identification of the data is considered, it is kept in

a permission-needed framework which only the authorized

parties can access. In such situations, the authorized

members can access a single version of the

information/data and the verification of the data can be

provided only the known members providing safety and

validity to the data and its security.

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Financial Frauds

•The blockchain provides prevention against the financial frauds by providing a complex

outlook to the transactions that are not easy in numbers either. The processes that

make the transactions complex in nature are the need for settlements, difference in

currency denominations, collateral requirements, etc.

•The processes that are multi-staged in nature requires human interaction which makes

it more difficult to break or alter. In such cases, blockchain helps in detection of frauds

by enabling the sharing of information in real-time and providing updates ledger on the

consent of the members in the party. These steps not only prevent frauds from

happening but also puts the identity of the fraudulent on stake. Not just this, it even

lowers the costs and time taken.


•The supply chain networks are complex with huge

number of people involved in the process and

blockchain helps in preventing the fraud by providing

transparent and easily traceable products.

•Any process cannot be hindered without the

verification and updates as approved by the members

of the party. The digital adoption in blockchain provides

tracing the products to the very origin.


The Supply Chain Frauds

Blockchain as a tool for financial and Banking Sector

• A blockchain is a tool that works as an asset in preventing

frauds to happen in the financial and banking sector. It

provides high-level pf security and a complex transaction

and number of users in order to make it difficult to alter or

manipulate.

• When the banking sector is on its hinges after various

frauds and tamperings, it simply protects the core

technology or transaction od any important data or

information.

• Blockchain provides lower costs, less time in transactions,

and smooth transaction with high security to the banking

industry by protecting it against frauds and threats.


• The cost reductions bank would gain after the adoption of

blockchain’s estimated by using the data used from McLagen’s

research and surveying a number of investments banks. It

presents the potential savings as the following-

• 70% of savings would be done on central finance reporting, as a

result of better efficiency, transparency, control, and data quality.

• 50% savings would be there on business operations (trade

support, middle offices, clearance, and settlements, etc)

• 50% savings are to done on centralized operations (KYC, Client

Onboarding), as a result of better data quality and mutual

consent strategy of data among the members of the party..

• 30% to 50% of savings on compliance as a result of enhanced

transparency and auditability.

• All in all, from the cost base of $30 billion savings, investments

banks would be able to save $8 billion correspondings to a total

of 27% of cost reduction.



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Blockchain In Banking Industry

Technology

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