The world of financial services is experiencing significant changes. We have seen a significant shift from physical to digital. Today customers desire everything immediately at the click of a button. Transparency and trust play an important role. Banks and insurers are working very hard to keep up with the speed which has led to changes to make financial products easier, cheaper and more in line with customers demand in a digitized world.
However, all this is what I call ‘old wine in new skins.’
When money is transferred, the whole process still takes us through the same old-fashioned and centrally organized clearing processes. We do not yet control what is ours as we still require to go through a series of security checks to log into a bank’s database to see the balance on our accounts. Wouldn’t it be nice if we didn’t had to complete endless forms? Blockchain technology behind Golden Coin, has the power to change. It excludes the need for middlemen in transactions to create a revolution in financial services.
The Internet has an immense impact on financial services and cut off some of the mediators from the transactions. With blockchain, the centrally managed database will be replaced by decentralized ledgers and transactions will take place peer-to-peer. Powerful encryption replaces the trust and security procedures we had placed in the hands of central institutions like banks, governments, or large corporations.
With blockchain, the trust of the middleman is replaced by a secure private key and a network of decentralized computers that verify and approve blocks of transactions. With these promises, Blockchain technology is lauded as the biggest disrupter to the financial services industry in the coming decade. It truly has the power to significantly lower costs, increase transparency levels, and bring down the time it takes to carry out complex and lengthy trade finance or market clearance transactions from days to mere hours.
Blockchain technologies can disrupt the financial services industry. The established financial institutions have already been testing the potential of the technology to reduce internal operational complexity and cost, reaching efficiency gains across the board. A large number of bank and insurance executives we have been talking to said they expect wider commercial adoption in the next three to five years.
In insurance, the Blockchain Insurance Industry Initiative (B3i) was launched to “make operations more efficient and to ensure better information exchange, which will reduce paperwork and errors, increase quality and lead to efficiency improvements” as Dr. Marcus Hablizel, Allianz Group’s blockchain evangelist says in his interview.
To summarize more about Blockchain technology on How it actually Works:
- The blockchain is an Internet-based, distributed, public database where transactions can only be added once they are validated through complex mathematics that proves authenticity of the data.
- The blockchain is a public ledger of all transactions that have been executed.
- The blocks are added to the blockchain in a linear, chronological order. Each node maintains an exact copy of the blockchain. The blockchain has a complete ledger containing all transactions ever generated and hence constantly growing.
- The new block can only be added after multiple miners solve the same mathematical problem and once they confirm the answer given by the first miner to solve the problem.
- New blocks can only be added in the precise order in which they were proposed to the network. Timestamps on all proposals are used to ensure the order of transactions in the chain. Furthermore, every new block contains a “pointer” to the block that immediately precedes it in the chain. This pointer essentially describes the fingerprint of the preceding node.
Last but not the least – will regulators see blockchain as a friend or a foe? Banks and insurance companies need to prepare for a wave of changes. There is no time to waste!
What do you think? Leave your comment below.
