In the last few years, blockchain has become increasingly recognized by banks and financial institutions as a great technology for providing consumers greater security in many different kinds of transactions, from storing value in Bitcoin and the other cryptocurrencies that made blockchain famous to plain-vanilla payments with old-fashioned money. Sooner than you think, we are all going to be using blockchain-powered services.
Like a regular contract, smart contracts include provisions about what happens if one of the parties breaches the terms. The difference here is that if one party fails to do what it said it would, an algorithm prevents the execution of the deal, such as the transfer of money to the defaulting party. Security, cost savings, and less time in court wrangling over terms – everybody wins with a smart contract.
Blockchain technology offers the opportunity to easily access nonfinancial data points that lenders can use to evaluate the creditworthiness of a borrower. It would make borrowing easy for people who do not have a credit history or do not have access to traditional financial intermediaries.
Blockchain is a distributed ledger system that prevents hacks by making multiple copies of the same entry, and securing and privatizing that data through encryption and cryptographically protected passkeys.
Cryptocurrencies, such as Bitcoin, are touted as the currencies of the future. Some institutions have started hiring financial services to manage investments in cryptocurrencies for their clients.
Payments were originally routed through a bank, where they took time to clear, adding risk, uncertainty, and cost to the process. With Blockchain technology, payments can be made instantly, not only locally but internationally as well, and not restricted to banking but any exchange over the internet. This will not only bring down any remittance cost but also the settlement time.