Looking at the state of most of the financial service providers, or banks in general, one might see that they are lagging in terms of technological updates. Accenture released a report stating that some of the large banks are still using banking systems that were released back in the 1970s and 1960s.
Perhaps it is safe to say that for these banks, a major share of the budget goes into maintaining these systems, and not introducing innovation. Such financial service providers must look towards the blockchain technology which is trending to a great extent.
Here, we can talk about BRAVO, who launched their microtransaction application back in 2015. They realized the needs and opportunities of a changing market and switched to the blockchain technology in banking, opening the possibility of anonymous payment via cryptocurrencies. Their CEO, Maria Luna, said:
“The cryptocurrency market is worth over $290 billion, but many users don’t know how to acquire coins and let alone, where to spend their coins…. BRAVO will change this and will let anyone pay or get paid in cryptocurrency seamlessly as we already do for fiat currency transactions.”
Amazingly, the blockchain technology attracted not just financial companies, but individuals and other industry as well. This is because, like everyone else, we at InvoZone also believe that this technology will have a large positive impact on financial business models.
So, how are banks using blockchain and how will it change money transfer. Let’s have a look.
How Blockchain Technology Will Change Money Transfer?
By taking out the need to rely on intermediaries to approve transactions between two parties, blockchain technology can speed up payments at lower rates as compared to banks. Also, since intermediaries are not present, blockchain can make borrowing money safer and at much lower interest rates.
Blockchain technology in banking sector provides an opportunity for companies by presenting them with immediate liquidity through the initial placement of coins, creating a new crypto-economic model.
It can reduce operating costs and bring us closer to real-time transactions between relevant institutions as well.
Perhaps it is easy to assume that billions, if not trillions of dollars are in the “clouds” just because organizations are using outdated and obsolete systems for payments.
Suppose you live in Kuala Lumpur and want to send part of your salary to someplace. You would have to pay a fixed transfer fee as well as an additional fee in tax percentages.
During this, your bank will receive a commission, after which it will process your transaction. This will then take an additional three to five days to complete the process.
Blockchain technology in banking can beat this system by offering cheaper and safer method to send P2P payments, eliminating intermediaries. Through cryptocurrencies, the amount goes to a decentralized ledger which anyone can use and check. This removes the need for third parties to verify transactions.
Especially in developing nations, blockchain looks promising with regards to giving people financial services. BitPesa, a blockchain-based company dealing in B2B effectively uses the technology to make payments in parts of Africa.
They recorded their monthly trading volume to be $ 10 million. A regular cross-border payment to Kenya can cost them up to 9.2%. Fortunately, using blockchain technology, they enjoy a rate of 3% only.
The advantages of blockchain in banking sector are great. Developers and software experts are effectively trying to work on even cheaper methods of payments by scaling cryptocurrency networks. Work is already advancing in Ethereum and Blockchain and it will most likely continue to other currencies as well.