Blockchain continues to revolutionise the digital world as we know it. Known as the ledger technology that facilitates our cryptocurrency-based endeavours, the rise in Bitcoin use has pulled the power of blockchain to the surface and experts suggest that this could just be the start of a crypto-based future.

In fact, 90% of the European Payments Council claimed that blockchain’s impact on the movement of money across the globe could substantially transform the financial industry by 2025.

As we move into 2022, blockchain’s importance continues to evolve as banking giants aim to go borderless in the wake of customer demand post-pandemic. Read on to find out why traditional banking has become redundant and why a blockchain-based financial industry is a likely future.

The Challenges Of Traditional Banking, and how Blockchain can help

Did you know that the average cross-border banking transfer can take 1-3 days to be verified and settled? The current centralised line of verification can hold up money movement and inconvenience consumers looking to send speedy cross-border payments.

Logistically, traditional cross-border banking methods also pose challenges to the banking institutions themselves as one card-to-card transfer has to bypass a chain of cost heavy processing, intermediaries and a long verification process before finally settling internationally.

Traditional banking has become outdated. As more customers move to new facilitators of automated money movement such as fintech giants like Paypal, blockchain could be the answer banking giants are looking for in order to revitalise the financial industry.

As money moving apps such as Paypal continue to tap into the power of cryptocurrency after launching their crypto-based ‘Super App’ in 2021, banking giants need to follow if they want to stay in the game.

Let’s see just how important blockchain could be in 2022 and the financial industry continues to adopt its endless potential.

Could Blockchain Be The Future?

The question is, could blockchain put traditional forms of banking back on the map? As the financial industry continues to digitalise, experts suggest that fintech adoption within the industry will only speed up the adoption of blockchain-based automation in the coming years.

In fact, according to a 2018 Worldwide Blockchain Survey of 1000 global banking giants, 95% of respondents affirmed that they planned on investing in some form of blockchain technology within the next decade.

As blockchain technology continues to become desirable within the industry, experts suggest that it will have a major impact on the success of global banking leaders and save the financial industry a substantial amount of cross-border based costs.

In fact, a recent report by Jupiter Research claimed that: “blockchain deployments will enable banks to realize savings on cross-border settlement transactions of up to $27 billion by the end of 2030, reducing costs by more than 11%.”

The Importance Of Blockchain For Financial Industry Success

Blockchain’s power to automate the banking process could provide a number of benefits for the industry. From decentralised transactions to heightened cyber security, both consumers and banking leaders are set to receive a more efficient experience and blockchain technology continues to be introduced.

Vitalik Buterin, Co-Founder of Ethereum, argues that blockchain technology will target the centre of the banking industry and bring better transparency, improved speed and efficiency.

“Whereas most technologies tend to automate workers on the periphery doing menial tasks, blockchains automate away the centre,” he said. “Instead of putting the taxi driver out of a job, blockchain puts Uber out of a job and lets the taxi drivers work with the customer directly.”

Blockchain is set to transform traditional banking in a number of ways. Let’s have a closer look into some of the key benefits the financial industry can expect as it continues to automate the system.

Faster Transactions

Introducing blockchain technology to the banking industry will ensure a future of faster and safer transactions. Better still, blockchain-based money movement decentralises the money moving process, making it much easier to cut out intermediaries, or should we say ‘the middle man’.

In fact, blockchain-based transfers reduce a standard remittance fee of around 15% to 3% thanks to an automated process reducing the need for long chain verification. This will not only save the consumer money during cross-border transfers, but this cost effective method also reduces banking costs too.

Cyber Security

By cutting out the middle man, you’re also cutting out the chance of data breaches within a long chain verification process. Blockchain technology is decentralised so it is able to enforce stringent security and provide a high level of blockchain-based encryption.

Enabling new forms of transparency for banking giants, blockchain is able to automate security checks using AI-based fintech. Thanks to new AI-generated profiling technology and its automated precision, banks will be able to confidently ensure their customers that their money is safe during cross-border transactions.

Automation & Smart Contracts

The introduction of smart contracts will continue to increase banking efficiency even further as automation continues to reduce human interference.

Once verification conditions are met, the next step within the transaction process will be automatically triggered, reducing paperwork and time needed to resolve manual errors. As there is no third party involved, banks will be able to ensure new levels of trust and transparency as encrypted records will only be shared between A and B.

In fact, Gartner predicts that banking organisations that adopt blockchain-based smart contracts will see a 50% increase in data quality, making these institutions more desirable for consumers.

Written by Rebecca Barnatt-Smith

Rebecca is a freelance journalist, specialising in Technology, Web Design and Crypto.

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