Blockchain Technology in the Financial Industry
You know what’s strange? As a whole generation grows up learning to do almost everything online, the generation above them—those who regulate this online space—still hang on to the claim “The internet is a new world for us all!”
To me it seems downright absurd that the digital age, which should bring us freedom, inventiveness and progress, is subject to regulations which corrupt the existence and activity of real people in a virtual world into existing, remote and abstract concepts.
Wouldn’t it make more sense to create new concepts which promote technical and digital developments whilst also reducing risks?
The Future is Now
Without exception, generation Z is going to influence every business area of the future. This generation doesn’t see a smartphone as an exciting, progressive medium, but rather as a trivial and day-to-day tool. Their ideas will massively impact every industry, especially financial services!
We’re talking here about things like the blockchain, as an innovation which can be developed into an overarching concept. We will compare the all important advantages and disadvantages. But I’m suggesting here that we take a step back and let others lead the discussion – and hopefully meaningful solutions will come out of it.
I'm a big fan of out-of-the-box thinking. Let's be creative, juggle with the information and start to examine the benefits of the blockchain - that's not just a sensible but also a more fun approach, don’t you agree?
What Advantages Does the Blockchain Offer the Financial Industry?
Let's just hypothetically agree that the advantages of current blockchain technologies are most relevant to the financial industry.
Even if that seems a bit philosophical, we should examine everything—even utopias—positively; after all, what else can we do? The point of view that blockchain technology will prevail in numerous areas and processes, especially in the financial industry, is anchored in this text - this concept is not too alien and is definitely more exciting!
So what advantages should we highlight?
1. Technical Durability
A basic requirement – a blockchain has a decentrally distributed network structure, so there is no central point through which transactions, for example, take place. Should there be failures, they are compensated in the network.
2. Cost Reduction and Automation
Of course, automation reduces costs – of transaction processing and all subsequent steps. The transfer of information and values can be better processed and monitored.
Of course, it depends on the type of blockchain and how it is handled. But first of all it is clear that the transaction history can be traced through the blockchain and that data cannot be falsified.
4. Independence From Intermediaries
The blockchain favors disintermediation: intermediate instances become superfluous through the transfer of values and information in a peer-to-peer network.
Relevant data is encrypted asymmetrically in the blockchain. In addition, the individual “blocks” build on each other on the basis of a time stamp, so that data cannot be changed. I don't see the fact that information about members of the network is anchored in it as a disadvantage: this is an important step towards the introduction of a digital identity and the support of extensive and sustainable cybersecurity!
As we have found, the blockchain offers a number of advantages for the financial industry – in my opinion, one of the most important points is cybersecurity. Of course, discussion of disadvantages in innovative concepts must also be included and, at best, eliminated. So far so good. But the fact is: I am convinced that new opportunities and challenges—especially with regard to cybersecurity—can be seized and mastered through blockchain technology. Traditional financial institutions should give absolute priority here and thus concentrate (again) on their core business - and that means the safety of their customers.
Are you interested in further information on the topics of the blockchain and cybersecurity?
Take a look at the critical report “Can the Blockchain Stop Cybercrime in the Financial Industry?”, available in the download area of my website.