Blockchain Technology in Financial Institutions

Blockchain Technology in Financial Institutions

Blockchain is a distributed database or ledger system that stores one-way permanent transactions; that can’t be altered and tracks assets owned by individuals, governments, or corporations. It is a valuable technology that can spur positive impacts in the society, particularly in financial institutions. According to IBM (2021), members of a blockchain network can access a single version of the truth from the beginning to the end, thereby promoting faith in the system. Hire our assignment writing services in case your assignment is devastating you.

Blockchain technology can be used in the global financial system to formulate a decentralized clearing system. Traditional means of inter-bank payment structure are done by intermediary clearing firms that involve complex processes like transaction reconciliation and payment initiation, which is time-consuming and also wastes computing resources. The disadvantages are evident when a transfer of funds is done across different countries with different monetary policies governing money transfers. Blockchain eliminates the setbacks by implementing a point-to-point payment structure, which improves service delivery and cuts costs (Guo & Liang,2016). This will push banks to process inter-country transactions fast because of the competition they face from this emerging technology.

In this era of post-internet revolution into big data, every individual possesses large volumes of data online, which can be used to estimate their creditworthiness, but this benefits only the big internet companies like Google and Facebook that mine data to establish patterns. It is a disadvantage because users have no ownership of their data and can’t reap maximum benefits. Guo & Liang (2016) posit that data in blockchain can be encrypted to uphold data privacy and ownership; this means credibility and reliability of the information. As such, blockchain in the financial industry can form the foundation for establishing modern credit systems.

Many banks worldwide access similar data while differently maintained; if blockchain is used, it brings all the data together with a decentralized system. It is a less costly set-up that enables innovation to thrive because traditional banks require large infrastructural investments and overhead costs to establish a limited number of players in the sector. As asserted by Mclean (2021), blockchain can transform the banking industry by ensuring a new business structure where there are plenty of problem-solvers. It fosters innovation and creativity instead of a centralized system with stringent ways of doing things; this further stimulates economic growth by the increased entities in the sector. With the advent of the Internet of Things (IoT), where billions of devices use the internet, and most of them link to banks, blockchain technology will provide a cost-effective way of accessing bank services since this concept utilizes economies of scale.

Blockchain technology can ease the recording, storing, and sharing of customer’s data by financial agencies, which helps identify the credit status of an individual. Banks can do this by storing encrypted information in databases. When the data needs to be queried, the original owner is notified before it’s done; this is important for security.

Conclusion

Blockchain can significantly revolutionize the banking sector, which can greatly benefit by cutting service delivery costs when embraced by financial institutions.

References

Guo, Y., & Liang, C. (2016). Blockchain application and outlook in the banking industry. Financial Innovation, 2(1), 1-12.

IBM. (2021). what is Blockchain Technology? – IBM Blockchain. Retrieved 15 April 2021, from https://www.ibm.com/topics/what-is-blockchain

McLean, J. (2016). BANKING ON BLOCKCHAIN: CHARTING THE PROGRESS OF DISTRIBUTED LEDGER TECHNOLOGY IN FINANCIAL SERVICES. Retrieved 15 April 2021, from https://www.ingwb.com/media/1609652/banking-on-

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Practical Connection Assignment
course: Adv Research Method) ITS833 Topic: Application of Blockchain Technology in the Financial Institution
job: working as an Information Systems Analyst

Blockchain Technology in Financial Institutions

Assignment: Provide a reflection of at least 500 words (or 2 pages double spaced) on how this course’s knowledge, skills, or theories have been applied or could be applied practically to your current work environment. If you are not currently working, share times when you have or could observe these theories and knowledge that could be applied to an employment opportunity in your field of study.