16 Jun 2022

395

Use of Blockchain Technology in the Financial Sector

Format: APA

Academic level: Master’s

Paper type: Research Paper

Words: 605

Pages: 1

Downloads: 0

Financial organizations are continuously searching for ways that can lead to fresh and practical innovations. The act of developing trust between businesses and customers in digital transactions is key to constant growth and loyalty. Most commercial organizations operate by optimizing economic exchanges and increase confidence with considerably secure business networks both globally and at a scale on the block chain. The adoption of blockchain technology has been orchestrated by the transparency and security the technology gives alongside the possible savings it can deliver to organizations regarding time and money to and increase effectiveness. 

Blockchain plays a crucial role in trade finance. It assures an improved trust and visibility across the participants and assisting in reducing delays, manual effort and cost ( Gervais et al., 2016). Financial institutions are utilizing blockchain technology to develop smart contracts between bodies. The technology is beneficial in clearing and settlement. It facilitates the real-time transfer of funds across financial organizations, eliminates frictions, and accelerates settlement. Yermack (2017) confirmed that the technology could assist the bank to save lots of money and increase the efficiency of clearing and settlement. It is becoming instrumental in improving the efficiency of clearing and settlement. 

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Blockchain offers security and monitoring on the horizon. It adds more attention to matters to do with security. Little has been indicated on the needs regarding controls and Blockchain will assist in addressing intermediary issues about working on commercial projects (Croman et al ., 2016). Concerns about safety, trust, and resource effectiveness are the core issues discussed by the technology. It is permitted institutions to offer better services with minimal costs, and such benefits are regenerated to the customer regardless whether it is a person sending cash to their family in a separate country or P2P lender. 

Since blockchain possesses the capability of encouraging trust, firms can expand the number of businesses with which they can do business. Digital startups and smaller financial retailers can access the blockchain infrastructure and cause them to being more trustworthy and competitive. Lending by corporates and consumers has explicitly become vulnerable to the current models utilized by blockchains ( PwC, 2018) . That is caused by the fact that blockchains are decentralized in nature and allow possible direct transactions between bodies and increasing peer-to-peer networks. The spanning of blockchains leads to the emergence of fresh cross-industry ecosystems that are certain to emerge. The technology causes synchronization of real-time data. That has the possibility of creating new openings to monetize data and develop current financial services. New models of business could take various forms and evolve as firms function with regulators to develop new platforms and processes. The blockchain is making this more useful and thus moving at a fast speed than it is anticipated and therefore makes the new businesses poised to break fresh ideas and enterprises ( IBM, 2018). 

Blockchain technology has been more emphasized on optimizing internal operations that occur within companies and local markets. The future applications of the technology could be tailored towards consolidation of the global financial systems currently existing for the creation of a centralized system of global trade in all the businesses ( Yermack, 2017) . That can result in the reduction in the cost of global trade for corporations while creating fresh venture opportunities for the consumers. 

In conclusion, it is noted that the technology has overtaken the initial, generalized disenchantment that caused by the negative media. Today it is not a preserve for just a few financial institutions that entail disruptive challengers and startups. Performing global agencies, for instance, Barclays and NASDAQ are studying and making their investments into it. That is instigated by the faster transfer of balances and the complexity to do with post-banking crisis regulation. 

References 

Blockchain for financial services - IBM Blockchain . (2018). Retrieved 6 February 2018, from https://www.ibm.com/blockchain/financial-services/ 

  Blockchain in financial services . (2018).  PwC . Retrieved 6 February 2018, from https://www.pwc.com/us/en/industries/financial-services/research-institute/top-issues/blockchain.html 

Croman, K., Decker, C., Eyal, I., Gencer, A. E., Juels, A., Kosba, A., & Song, D. (2016, February). On scaling decentralized blockchains. In  International Conference on Financial Cryptography and Data Security  (pp. 106-125). Springer, Berlin, Heidelberg. 

Gervais, A., Karame, G. O., Wüst, K., Glykantzis, V., Ritzdorf, H., & Capkun, S. (2016, October). On the security and performance of proof of work blockchains. In  Proceedings of the 2016 ACM SIGSAC Conference on Computer and Communications Security  (pp. 3-16). ACM. 

Yermack, D. (2017). Corporate governance and blockchains.  Review of Finance 21 (1), 7-31. 

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StudyBounty. (2023, September 15). Use of Blockchain Technology in the Financial Sector.
https://studybounty.com/use-of-blockchain-technology-in-the-financial-sector-research-paper

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