The financial services industry continues to evolve with our ever-changing world of technology. Most people have heard the term ‘blockchain’ before, but what does it mean? And how is it revolutionizing the financial services and banking industries? Here is a brief overview of blockchain and how it is shaping the finance industry.
What is blockchain?
In the simplest sense, blockchain is a chain of blocks. However, these blocks are not a traditional one; they are a block of digital information, aka a digital transaction. These “blocks” are stored in a public database, which is called the “chain.” So, in laymen’s terms, blockchain is a string of digital transactions and contain information such as time, dates, dollar amounts, etc.
How is this technology benefiting the financial industry?
Blockchain has been out for about ten years now; however, more recently, banks and credit unions have evolved and started using this technology as it provides a more secure transaction process. The DLT, or “distributed ledger technology,” is safer because of self-sovereign identity. This system doesn’t rely on any centralized authority as it is a portable form of identification. Thus, it makes it almost impossible for anyone to hack into and steal information. This added security is clearly beneficial to banking institutions and credit unions because it allows for safe and efficient transactions of customer data.
Blockchain can also reduce “Know Your Client” expenses. Rather than regularly having associates update clients’ information, blockchain can instantly update their information, which lowers costs and time for you and your client.
Blockchain also offers “smart contracts.” These contracts are a code on top of a block that automatically executes with set terms and conditions. Smart contracts get rid of the middleman and can help you “exchange money, property, shares, or anything of value in a transparent, conflict-free way.”
Need help building your IT team?
It’s no wonder that banks and credit unions are shifting their efforts to blockchain technology to reduce costs, save time, and make transactions more secure. If your institution is looking for talent to facilitate this technological transition for your organization, reach out to me. My team and I will work with you to find the best IT talent in the market. Reach out to me today, and let’s work together!