What’s New With Blockchain In Banking And Insurance

Blockchain has already set its standards in the world of technology in sharing peer-to-peer secured data, providing digital identity, audit trials, bank transactions, etc. Along with the overwhelming response of blockchain, there shattered myths as well.

What exactly is a BlockChain?

The blockchain is a collection of series of transactions involved in sharing data among the nodes involved. Hash codes are used to represent blocks in chronological order, where each block will have a reference to previous block hash. Chain system of hash codes helps you in understanding every transactional change ever happened.

What made blockchain gain hype within a short time?

Millions of dollars have spent in research and development of blockchain to understand whether one can go with blockchain to integrating it to their business. Test cases are adequately examined and then concluded blockchain provides sustainable digital relationships in almost every use case they tested. These results gave hope to blockchain to invest more, to test with other possible industries.

The journey of BlockChain so far:

• Blockchain took one year to get into the real world after Satoshi Nakamoto announced its release in 2008. Genesis block happens to be the first block to be mined, and in modern terms, we call it as block 0.

• In 2009, bitcoin market was set up and started its operations in 2010. Bitcoin parity with US dollar was a milestone for Blockchain in the following year.

• Within a couple of years later, in 2013 market capital of blockchain reaches one billion USD.

• NASDAQ begins its trial of blockchain in 2015.

• Soon with the span of 3 years, Ethereum(for smart contracts using blockchain), Hyperledger project by Linux foundation, Blockchain tech company R3, Decentralised Autonomous Organization came into existence and were successfully executing operations of blockchain.

• Japan recognized virtual currencies in 2017.

• Now Switzerland is accepting tax payments using bitcoin.

Blockchain into Banking

In the initial days of the blockchain, there were not much of integration of blockchain into banks. Most of the banks felt blockchain would be lack of conviction. In due course of the time, banks started observing the developments made in blockchain and their successful executions; they slowly started ideas to implement the same.

Santander bank in the UK is the first bank to implement blockchain technology in the year 2015. ICICI from India happened to be the first.

How does blockchain help Banking transactions?

Following are the steps involved in banking transactions with blockchain:

• Request for the operation using cryptocurrency

• First block node is initialized and starts the transaction record.

• The blockchain verifies with the transaction.

• After verification, it created a unique code to that particular transaction block.

• And this block is placed in chronological order with the first block.

• Transaction once done cannot be modified.

What is so unique about blockchain enabled transactions?

• Transactions made by blockchain are far less expensive than traditional operations.

• Blockchain performance is quite fast than existing transactions.

• Clearing and settlements made easy with distributed ledgers.

• Securities can enhance with traditional tokenizing guards.

• Loans and credits can be made accessible by eliminating third-party brokers, thus provides low-interest rates.

• Know Your Customer(KYC) is one of the significant operations of any bank in providing trusted services. Blockchain’s Enterprise Ethereum Alliance’s in association with Accenture has made ID2020 to make sure of their customer's identity safe and trusted.

• Syndicate loans are the area where much of technology is not involved yet. Blockchain could make it comfortable working with loans and repays.

Future Innovations in Banking with Blockchain

1. Hyper Ledger Fabric Project from IBM

Aimed to provide trade finance platform for international transactions using blockchain. IBM cloud is used to integrate nodes. Currently, seven significant banks are supporting IBM in this project.

2. Utility Settlement Coin

This coin used blockchain technology for active transactions handling currency backing issue thus reduces credit risk.

3. R3’s blockchain consortium

Checklist of this consortium includes all the banks to build their blockchain developers to develop their ledger-based services. R3's consortium is requesting governments to accept these ledger-based transactions.

Blockchain In Insurance Sector

Blockchain can record any sort of transaction that may include physical assets or digital data exchange. Even in the insurance sector, most of the operations are not digitized and take a long time in processing the claims. Blockchain could help in reducing the time lapse and helps insurance providers in reducing the operational costs.

Insurance Operations Uses Blockchain:

• Reduced manual work of maintaining recorded written on paper.

• Improves trust factor among insurance providers, partner banks and customer as blockchain provides transparency.

• When insurance companies are capable of providing transparency in their services, there exists some customers getting insured.

  • Most of the claims made are fraud as the single incident is reported with multiple requests. With blockchain, this can eliminate by recognizing similar attributes of any claim filed.

• Smart contracts help in understanding what includes in insurance. Most of the insurance providers come up with their company policies that are too long and confusing. Blockchain helps in providing transparent conversation about the claim ensuring both get benefited.

• Health insurance made easy with the kind of information recorded, and thus it helps in both healthcare and insurance sector with single blockchain transaction.

• Repetitive data entry when someone needs to change their insurance provider can be made accessible with single blockchain entry as KYC data verified.

• Property and casualty insurance can be handled using smart contract by shared-ledgers, thus improving efficiency.

Apart from the existing features provided by blockchain to banking and insurance, it can integrate different fields as well. Like in case of healthcare and insurance, insurance and banking, etc. With the existing records made by blockchain in the market, one cannot deny the fact that blockchain’s potential is limited. Enough research has to be made to use blockchain is making every possible industry understand the efficiency.

Industry leaders of banking have already started implementing existing features provided by blockchain and set as examples for other banks to adopt advancements in serving their customers better. Goldman Sachs, Bank of America Merrill Lynch, R3, Barclays, HSBC, Royal Bank of Canada, JPMorgan, Fujitsu, etc., have started working with their backed partners in making use of blockchain in their services.

Banks can use Blockchain more than what we feel it has got now. To make practical use of blockchain in insurance, new companies have to come up with innovative ideas. Surely blockchain has potential to transform transactions happening around the world in every industry possible.

N Subash Reddy has been the senior content writer at Mindmajix. His writings focus on latest innovations in software and technical updates. Prior he was web developer familiar with most of the web and UI technologies. He is computer science post graduate. You can connect with Subash at LinkedIN, Gmail, Twitter and Facebook.