According to a leading industry website, 40% of Americans haven’t visited either a credit union or a bank in the past six months.
Not quite surprising, is it? As we all know by now, banks are no longer critical for financial management. This, in no way, means that banks are disappearing. Taking advantage of this situation, open banking is contributing both in terms of the impact it has on consumers and businesses and the value of the products that could be developed.
Goodbye Banks, Hello Blockchain!
Alongside banks, there’re a lot of other companies that lend, save, and invest in easier, cheaper, and faster ways than financial giants. All of these are made possible with blockchain entering the scene. Although there are challenges to overcome before blockchain takes over banking and financial services, the potential labor and cost savings are so appealing that most financial institutions are now investing millions in hiring resources to do thorough research on implementing it.
A step ahead?
Blockchain has steadily advanced into the world of payments to change the transaction environment. It reshaped the financial services by:
- Removing incorruptibility and driving efficiency and simplicity by establishing new financial processes and services infrastructure
- Allowing the inflow of liquid cash through smart contacts, by which participants will be able to convert fiat currencies to support foreign exchange
- Prompting cross-border payments in real time
Meanwhile, distributed ledger technology (DLT), or blockchain, has made small payments affordable, taking the required labor out of the process. This makes broker intervention unnecessary with shrinking processing time. The potential of the technology has been brought to the notice of incumbent institutions as well as new entrants, such as the P&C insurance sector. The insurance sector, on their part, depends on third parties to offer risk, asset, and loss data in the underwriting process. Data collecting and claim submission require manual effort, which increases the potential for manual rework and fraud. With DLT intervention, the process can be streamlined with smart contracts that relieve loss adjustors to go through every claim.
In the trade finance market, DLT can boost the efficiency of export/import by streamlining access to documents related to trade, faster settlement, and greater capital efficiency. Even for post-trade activities, applying smart contracts can result in counterparty reduction, eliminate the need for intermediaries, and pave the way for a faster settlement.
DLT or blockchain seems to open up new opportunities for cost reduction. It can dramatically improve the customer journey and facilitate a more secure form of data transaction and identity. It is no more a secret that a few of the major banks are gradually complying with open banking. However, the process can be really frustrating, but after a while, they will all have to comply.
HCLTech, a leading IT partner, has proven expertise to overcome these challenges with its capabilities and knowledge of the business domain.