Blockchain technology has shown its ability to transform and revolutionize various sectors, even in its nascent stages. The benefits of decentralization and transparency are attractive for different industries globally, but the industry paving the way in execution is the banking, financial services, and insurance (BFSI) industry.
The BFSI sector is highly transformative and data-driven and is rapidly changing with respect to the latest technological and digital aspects. There has been proven research on the use of advanced technologies such as robotics, machine learning (ML), artificial intelligence (AI), and data science for improving economic transactions and customer service. Blockchain has already benefited the BFSI sector in improving cybersecurity and overall functional efficiency.
With tremendous progress made in the technological and digital fronts, there are a growing number and variety of cybercrime cases that often result in financial losses for companies and compromise cyber-security. In any case, a lot of progress has been made in developing better and more secure cyber safety infrastructure for companies, primarily the BFSI sector, to fight such cybercrimes. Blockchain is one such technology that has provided the financial industry with such robust infrastructure. Gone are the days when blockchain comprised cryptocurrencies, Litecoin, and Bitcoin.
What is Blockchain Technology?
The blockchain technology has dramatically changed Bitcoin, Dogecoin, and other cryptocurrencies, and made them more secure, open, and anonymous. The technology is essentially a repository about every cryptocurrency transaction in detail. The database — known as the public ledger — consists of metadata about the number of transactions. The public ledger is accessible through application programming interfaces (APIs) and torrent sites. It is cryptographically encrypted to protect it from any cyberattacks.
The technology could potentially save banks thousands of dollars each year by substantially reducing processing costs. Financial institutions are likely to take the opportunity to reduce expenses and make changes to the conventional paper-intensive global trade finance processes. Blockchain technology would be a boon for banks to be more profitable and valuable. Additionally, it would allow them to track all documentation and assets digitally, as a permanent ledger in real-time.
How will Blockchain Benefit the Finance Sector?
Blockchain safeguards the financial assets from the risks of cybercrime, cyberattacks, hacking, and crypto-jacking. Let’s look at how the BFSI industry would benefit from blockchain technology.
1. Distributed Network for Secured Transactions
The distributed infrastructure of blockchain technology is a benefit that can prevent or reduce the effect of cybercrimes. As blockchain does not have any loopholes or shortcomings, a distributed architecture helps the finance sector attain operational efficiency.
2. Cryptographic Encryption to Prevent Thefts
The blockchain acts as a decentralized ledger, where data is added by customers and is cryptographically encrypted. This upholds the confidentiality of the information and prevents cybercriminals from tampering or stealing data for committing crimes.
3. Enhanced Transparency
Blockchain technology increases transparency for data storage and safety. This technology is tough to decrypt, manipulate, or tamper with because it has a decentralized storage system, making it more reliable and preventing cyberattacks.
4. Increased Security
Blockchain protects user data through multiple layers of security and encryptions, making it extremely secure for cryptocurrency banking and international transactions.
The Bottom Line
Although Blockchain technology is still relatively new, the BFSI sector’s opportunities look quite promising in terms of enhancing cybersecurity and overall operational efficiency. With the ever-growing technological advancements, blockchain has brought numerous applications to assist the financial services sector in achieving cyber-security and business efficiency.
Currently, the technology is doing well with regard to providing cybersecurity, but it’s not possible to predict potential risks and dispute resolution. The problems can be fixed, but it’s essential to research and understand what blockchain is all about thoroughly.