Content: Blockchain Banking Use Cases
- Distributed Clearing Mechanism
- Accounting Collaboration
- Global Transactions
- Digital Database
- Credit Information Systems
- Data Ownership
- Credit Data Sharing
- Financial Transactions
Distributed Clearing Mechanism
So interbank payments often rely on processing by intermediary clearing firms, which involves a series of complicated processes. This includes for example bookkeeping or transaction offsets. Therefore, the process takes time and costs a lot. So, using cross-border payments as an example, the clearing procedures for each country is different. Thus, a transaction requires nearly 3 days to arrive. This shows the low efficiency and immense volume of used funds involved.
Thus, we can easily implement point-to-point payments with blockchain. As a result, we don’t need third parties anymore. Thus, this will improve service efficiency and reduce the transaction costs of banks. As a result, it will also enable banks to satisfy for rapid and convenient payment clearing services for cross-border activities.
If you want to transfer money between different banks, it is still very costly for banks nowadays. You always have to make sure that the ledger is always correct. Therefore, banks have to communicate with each other the whole time. In addition, banks must review clearing systems all the time. This is not only costly but also inefficient and slow.
With Blockchain we can unify Banks based on a shared databank. They can use a single databank for bank accounting. This could enable real time transfers and reduces fees for customers. As a result, we can transfer money between different banks at lower costs.
About a quarter of a trillion euros is transferred globally every year. The cost of a transaction and the transaction time are very high.
Block-chain based payment processes could significantly improve this problem through its security, transparency and low cost. The payment process would only take a few hours instead of several days.
Today, banks have to store a lot of paperwork for security reasons. The storage of documents takes around 30% of the infrastructure costs. Furthermore, these processes are slow and time consuming.
With Blockchain we can digitalize the whole paperwork. In doing so, both the security aspects and the access requirements are fulfilled. As a result, banks could reduce their operation costs by 20%. In addition, customers and banks no longer have to waste their time with so much paperwork. As a result, this makes storage processes much shorter.
Credit Information Systems
The ineffectiveness of bank credit information systems is mainly due to three things. First, the lack of data makes it difficult to judge the situation of personal credit. Second, there are difficulties in intern data sharing. Also, it is not clear who owns the data. This leads to difficulties in circulation due to concerns for privacy and security.
Banks can use Blockchain to share personal data without revealing them. As a result, customers don´t have to worry about privacy and security. But also banks have a better quality of data. Thus, it is easier for banks to hand out loans.
So all of us produce massive amounts of data on the Internet. These are extremely valuable because they tell a lot about your current credit situation. But large companies own most of this information. Hence, individuals are unable to establish their ownership or utilize these data. Also, in order to protect user privacy, data flow is difficult to achieve between these companies. As a result, this leads to the formation of data islands.
Blockchain can perform data encryption. So this can help us control our own big data and establish ownership. As a result, this can help that the information is genuine and reliable. It can also reduce the costs of data collection by credit agencies.
Thus, using blockchain, big data can become credit resources with clear personal ownership, and even establish the base of future credit systems.
Credit Data Sharing
Blockchain can make it easier to automatically record big data. Thus, it also can help to store and to share encrypted forms of the customer’s credit status within institutions. This enables sharing of credit data. So banks should store customer information in their own database. Then they have to employ encryption technology to upload summary information for storage in the blockchain. When there are query requests, the original data provider can be notified using the blockchain and a query can be performed. Therefore, all parties can search for external big data, while also not show their core business data.
So encryption can ensure that the summary and original information are consistent. Thereby preventing the provision of false information that can mislead their counterparts. Within the framework of customer information protection regulations, the blockchain is able to realize the automated encryption and sharing for customer information and transaction records. This helps eliminate redundant work involved between banks.
Supply chain finance involves an extensive amount of manual inspections and paper-based transactions. The process also has a lot of intermediaries, a high risk of illegal transactions, high costs, and low efficiency.
Blockchain can reduce manual interventions and employ smart contracts in order to digitize procedures that rely heavily on paperwork. So this would greatly improve the efficiency of supply chain finance and reduce manual operational risks. Thus, smart contracts can ensure that payments are made automatically once a certain time and result are reached. A Dapp in supply chain finance can help reduce the costs to banks and trade financing enterprises.
Also, transaction efficiency improvement ensures a smoother flow of overall trade financing channels, which greatly increase the income of the overall trade chain.
Conclusion: Blockchain Banking Use Cases
Blockchain disrupts the bank industry and the technology of the payment clearing and credit information systems in banks, thus upgrading and transforming them. For the first time, banks can use a common database without having to trust each other. This will create a whole new form of financial services.
It is worth noting that the problems of regulation, efficiency and security in the process of any new financial innovation have always sparked debates. But regulation and other problems will not stop blockchain and we see great potential for the future.