The financial industry is popular for the legacy system. There are some banks that come with a bundle of the legacy systems. A few of these are even more than thirty years old. Thus, it isn’t surprising that financial services such as banks have embraced this technology. This enables them to save money along the way. Banks will be able to trade cheaper and faster, using blockchain, making them more efficient.
Digital ledger has several benefits for the financial industry. Let’s take a look at them.
Instant Settlements Through Blockchain
A transaction through a bank usually takes seconds but settlements take around 7 days to execute using blockchain will help in making all settlements user optimized. Thus, it will save money and time for both entities involves. The technology also gets rid of the requirement of back-office and middle-office staff since transactions will be settled instantly. This will provide banks with a crucial drive to explore.
Boost In Financial Solution In Regards To Crisis Blockchain Way
There are more options for financial solutions during the time of crisis because of the availability of the brand new financial products. The largest crypto exchange, Bitfinex had been hacked in 2016. The solution that they came up with was to compensate the customers who are sharing equally in the loss along with RRT (Recovery Right Token). Each token had a value of $1 and each of them could be taken as an IOU. The token could be traded at the market price if they didn’t believe that Bitfinex could recover. All of the tokens can be exchanged for equity. Also, they are going to be brought back $1 in time to come. This is an innovative solution and without blockchain, this might not have been possible. Without this technology, the company might have gone bankrupt and every customer would have suffered a loss by losing their money.
Better Capital Optimization
One of the primary features of the technology is that eliminates the requirement of a trusted intermediary. This enables a peer-to-peer transaction. When it comes to financial services, it will render useless the intermediaries such as the custodian banks, or clearer, who might a large amount of money.
With blockchain, financial services will be able to enjoy improved capital optimization because of a considerable reduction in the operational costs of banks. Moreover, with this technology, the cost along with the surrounding ecosystem is usually higher than the transaction management cost. Nevertheless, the participants of the banks take responsibility for the transactions. This leads to a considerable cost reduction.
Many banks are experimenting with a digital ledger in some way or the other. They concentrate on multiple blockchain networks for finding out which technology is offering the best solution when it comes to an improved financial industry.