Blockchain started as the foundation of crypto currencies like bitcoin, but the technology’s potential applications stand to revolutionise how banking and commerce are conducted in the digital era. Here are six ways blockchain technology will transform everyday commerce.
1. Streamline complex processes
Commerce today is largely manual, paper-based and reliant on cumbersome legacy software systems to serve the number of parties connected to a single transaction. Blockchain puts all relevant parties into a common digitised infrastructure, allowing for faster and more efficient execution of transactions and contracts. For example, a standard mortgage application today involves creating a paper trail between the borrower, loan officer, underwriter and home valuer, among others. Blockchain may connect all actors, updating ledgers immediately, automatically and transparently.
2. Cut out the middleman
Payment transactions traditionally rely on a central processing authority or middleman, which often requires time for settlement. Blockchain offers a transparent and immediate way for two parties to pay each other without depending on central infrastructure like SWIFT or other payment schemes, so funds are received instantaneously.
3. Perform cross-border transactions in real time
Sending funds across international lines through telegraphic transfer or money orders involves a wide set of processes including anti-fraud checks, foreign exchange and clearing of funds. For international commerce hubs to developing regions that may be underserved by brick-and-mortar banks, blockchain promises to create a cross-border network through which money is exchanged at the speed in which information moves today.
4. Reduce fraud and increase transparency
Data stored on a blockchain is decentralised – unlike a centralised database such as traditional bank ledgers. Because information is not located in one single place, all parties with access to the blockchain have complete transparency, so any fraudulent activity or data breach would be immediately noticeable and traceable.
5. Improve customer verification
‘Know your customer’ (KYC) and customer due diligence processes cost financial institutions on average USD60 million, and some banks spend up to USD500 million per year, according to a Thomson Reuters survey. Storing KYC statements on a blockchain allows a bank to access a customer’s information and share with third party organisations such as insurers, car rental firms, and loan providers, creating increased efficiency in compliance processes and reduced operational costs.
6. Create near perfect records across all industries
Because it allows for the recording, storing and transferring of data across a common platform, a blockchain can be used for business documents such as smart contracts, land registry transfers of value, mortgage records, medical records, even simple records such as car ownership and repair history. That means in the future all organisations may be able to validate records seamlessly without you having to lift a finger.