Blockchain technology has many uses, especially in financial services. Blockchain and financial services go together because blockchain technology is a digital, distributed transaction ledger with identical copies maintained on each participant’s network. This means that all parties involved in a transaction can review previous entries and record new ones without disrupting the ledger. Blockchain in financial services acts as a middleman eliminating the possibility of transactions being destroyed or forged allowing financial services to implement a trusted transaction network without a central authority.
Blockchain technology is becoming more well-known and implemented in many sectors leading to a rise in blockchain finance technology. As a financial services provider, you may be wondering what blockchain technology companies can offer your institution and if it is worth it to invest in blockchain technology. Here are a few ways blockchain technology can benefit your financial processes and why it’s worth it to invest in blockchain technology or at the very least consider investing in this trusted transaction ledger.
Benefits of Blockchain Technology for Financial Services
Transferring value has always been an expensive and slow process for financial professionals but with blockchain finance technology, financial professionals can speed up and simplify this process. This not only makes cross-border payments easier and faster to complete but also significantly reduces costs.
The financial services industry has been seeking to reduce heavy transaction fees and transaction times for decades now and with blockchain finance technology, now they can achieve this. Blockchain technology offers more visible security for transactions immediately, something other technology cannot. Blockchain technology eliminates credit risk and exchange rate risk that is so prevalent in international transfers.
With blockchain in financial services, financial professionals can utilize this technology to allow for greater trade accuracy and shorter settlement processes. Blockchain technology is so accurate, many financial professionals are beginning to understand that it is the future of share trading.
A very beneficial reason to invest in blockchain technology is its ability to execute commercial transactions and agreements automatically. Blockchain’s smart contracts application enforces the obligations of all parties of a contract without adding the expense of a middleman. With blockchain in financial services, financial professionals don’t need to worry about contract parties altering the contract or making fraudulent entries.
Online Identity Management
Another reason blockchain and financial services go together is blockchain’s ability to allow users to choose how to identify themselves and who will be informed when it comes to identity management. With blockchain finance technology, users will still need to register their identity on the blockchain but after they’ve done that, they can re-use that identification for other services making online identity management much easier and simpler.
Loyalty and Rewards
With blockchain in financial services, financial professionals will have more transparency and traceability of transactions. This not only helps banks and insurers create better reward and loyalty programs that fit their performance management efforts but also enhance the engagement of their customers.
As customers continue to make smaller payments, this is increasing economic activity creating a need for technology that can support higher volumes of data with lower fees. Blockchain in financial services is trusted technology that can easily support this and offer financial advisors better ways to appeal to their individual customers.
Steps to Implement Blockchain in Financial Services
Many financial corporations are overdue for an upgrade to their processes to withstand new volumes of data and new security threats to their organization. Since blockchain technology offers no centralized version of the information, it is far more impregnable and recoverable than other technology solutions.
Blockchain technology is not only benefitting traditional banks but fintech and non-bank tech players as well. Blockchain finance technology frees new entrants of legacy problems helping them create radically cheaper platforms for innovation. For traditional financial institutions to keep up with these new entrants, they must invest in blockchain technology now and implement this trusted ledger into their financial services.
Step 1. Select Your Platform
The first step to implement blockchain on your network is to install Go-ethereum or Geth onto your workstation. This will connect you to Homestead, the main network of the blockchain platform. Geth is available for Linux, iOS, Android, macOS, and Windows.
Step 2. Initialize the Blockchain
To initialize your blockchain finance technology, simply create your first block manually. This block must contain all the characteristics of the chain that will be shared at all the nodes of the network. To define this block, you must create a file in JSON format. Once this file is filled in, Geth will create a folder containing the blockchain and initialize it.
Keep in mind that to ensure the propagation of the node-to-node program on Ethereum, it’s necessary to have cryptocurrency to acquire the necessary computing power for the actions of the network.
Step 3. Choose the Right Consensus Protocol
Choosing the right consensus protocol is important because it makes hacking attempts difficult and protects you from spam attempts to overload your network. Hashcash is a famous consensus by Proof of Work that makes hacking and spam attempts impossible to complete.
Step 4. Execute the First Smart Contract
Smart contracts self-execute from a predefined threshold that can be a date, an amount, or any duly authenticated event. The ability to run a smart contract is a major focus of blockchain technology and without being able to do so, the technology may not be worth your time.
Step 5. Debug and Scale
Debugging and scaling your blockchain takes some serious computer skills and it’s recommended that you enlist the help of one of the many blockchain technology companies available to help you perform this step.
Without debugging and scaling your blockchain network, you will be prone to bugs that could steal all your money or risk not being able to provide your customers with the technology they need.
Blockchain in financial services offers financial professionals many benefits that other technology solutions cannot come close to offering. While blockchain is a semi-new technology, many financial professionals may not be ready to implement it. It is better to invest in blockchain technology now though, to avoid being put out of business by new fintech professionals in the financial sector.
Implementing the help of one of the many blockchain technology companies available is necessary to ensure that your blockchain network works for your customers and your business. Have you implemented blockchain technology in your business yet? If not, what is holding you back?