“Blockchain” is one of the hottest buzzwords in tech this year, and it’s on its way to disrupting numerous industries. Most notably, banks and other financial institutions are starting to show interest. The financial services industry is notoriously slow to innovate so this is a big deal. What’s causing banks to cut through the red tape of regulation and invest in blockchain? Let’s take a look.
What is Blockchain?
First things first – what on earth is blockchain technology? Simply put, blockchain allows a database to be spread over a whole network of computers rather than being hosted on one central server. This makes data harder for hackers to change because there are so many copies. Multiple users can also access the same records at once rather than one at a time, increasing efficiency (think Google Docs vs. emailing a Word document back and forth). Originally created for the internet currency Bitcoin, blockchain is now being used for a variety of applications.
How Will Blockchain Disrupt the Financial Industry?
If and when blockchain goes mainstream, the entire fabric of the financial services industry will change. Data will be harder to hack, which is music to consumers’ ears after a year full of high-profile breaches. Processing speeds will increase as well, and settlements will take place faster than ever before. This will magnify the overall speed of commerce nationwide. Customers will be able to take ownership of their data and will no longer have to rely on banks as gatekeepers. With customers holding their own authentication keys, banks will need to revolutionize their business model to keep up. There are many different blockchains in the space already, with more on the horizon. Banks are experimenting with different models to see which will work best for their needs, and different blockchains may end up specializing in different asset classes as the technology comes into its own.
Where Will We See This First?
Everyone wants to lower costs, and banks are no exception. The efficiencies gained by the use of blockchain will cause operating costs to plummet as banks discover new ways to use the technology. One of the most important cost saving benefits of blockchain is its built-in redundancy. Take, for example, a loan transaction involving numerous vendors and banks. These types of transactions require quite a bit of oversight and review by all parties involved, and the process as it stands today is far from simple. From manual data entry to outdated fax machines, it’s a complicated and lengthy ordeal. With blockchain, the days of keeping multiple copies that must be compared and regulated across institutions are over. The distributed database allows for one secure copy to be handled and edited by all parties involved, saving hours of time.
How Do I Prepare?
You’ve taken a great first step by reading this article and getting informed about blockchain, but you’ve got a thousand other things to worry about. The best thing you can do to prepare yourself for the changes blockchain will inevitably bring to the financial industry is to make sure you have a credit card processing partner who is ready to educate and guide you moving forward. Work with someone on the cutting edge, who embraces blockchain technology and is eager to teach you how it can help your business – someone like 360 Payments. Give us a call at 1-855-360-0360 or drop us a line on our website. We’d love to show you how we take customer education seriously.
PS – Check out a few more of our top tech tips here.
PPS – Learn more about the credit card transaction process here.