Let us start on with what you probably already know. The banking industry is evolving and rapidly transforming from the current physical to the digital model. Gen Zers is at the heart of this transformation.
Digital services and prompt access to user accounts internationally are emerging as the new norm. With mobile banking, you can handle all financial instructions:
- Applying for Loans.
- Touch Payments.
- Account Transfers.
- Balance Management.
All of these services are in the palm of your hand, which is awesome. However, the mobile banking system is long from being 100% digital. It is also far from being fair.
Problems Associated With The Traditional Banking Model
The banking services as we know them are very expensive and slow. Even as technology in other areas, such as vehicles development and mobile phones, appears to race rapidly, getting better and more convenient, banking seems to be lagging. Why?
One fact about banks is that they are for-profit organizations. Every bank, no matter the country or location, is designed to take advantage of clients. If you have some cash in a bank account, the chances are that it will earn interest, but rarely will this go beyond 0.5-2% annually.
However, banks lend your cash to other clients and charge a very high interest rate, which can be as high as five times what you get. Check the average rates of common loans offered by banks:
- Mortgage lending: 2.98%.
- Student lending: 4.5-7%.
- Credit card lending: 16.15%.
Most banks are comfortable with this trend because of one thing; clients do not complain. They give very little but take away a lot!
Blockchain Is Changing The Future Of Finance
Have you heard about blockchain technology and crypto coins, such as Bitcoin and Ethereum? These new technologies can potentially change the finance industry for the better, but they can be complex to understand. The fact that they are providing an alternative approach to banking services means that banks would not want people to learn more about them.
1. Blockchain Technology Has A Lot Of Benefits
Blockchain has been in use all over the world and has proven that it can support millions of transactions every day. People use it to send funds across the globe at supersonic speed. No matter the side of the globe you are in, you can send cash to the other at top speed and pay almost zero fees. This means you can operate without:
- ATM fees.
- Processing fees.
- Account maintenance fees.
- Waiting for a long time to get transactions done.
2. Blockchain Networks Are Powered By Computing
One of the reasons why blockchain is preferred for financial transactions is that it is cheaper, faster, and global. Think of it like the way social media works. Now, the technology that makes it possible to chat with people all over the globe on Facebook and Instagram has been adopted in finance systems.
Since blockchains run on programmed systems, no centralized authorities or middle people are required. The cost of transactions is also very low because there are no charges for rent, water, or power bills.
3. Blockchain Is Simple
Since blockchains use computing power, the transactions are captured and added in new blocks. The process is automated such that when you send, say $400 from your account, the amount is deducted from it and added to the recipient’s account. The whole transaction is fast and safe.
The debate of Blockchain versus banking services will go on and on. It will not end until and unless the Blockchain has got accepted by all the banking systems entirely. And till that time, there will be a bunch of questions in our minds. Though I have tried to clear the doubts that you might have.
Still, when we are talking about Blockchain, the information will never be complete. And as it is a bit of a complex subject often we end up having several doubts. So, here I am including some questions with the respective answers to make the whole thing a bit more clear for you.
1. How Is Blockchain Used In Financial Services?
Along with streamlining lending and banking services, blockchain is always ready to decrease issuance, reduce counterparty risk and settlement times. In addition to all those things, it also allows the following essentials.
- KYC/AML data.
- Authenticated documentation.
- Enable real-time verification of almost every kind of financial document.
- Minimized operational risks.
2. How Is Blockchain Used In Banking?
At lower fees, Blockchain technology can facilitate faster payments just by establishing a decentralized ledger for payments. Distributed ledgers are capable of reducing the operational cost along with bringing the users closer to real-time transactions between any two financial institutions.
3. Will Blockchain Take Over Banks?
Cryptocurrencies have the potential of replacing the fiat currencies easily in terms of their medium of exchange, store of value, and obviously unit of account. In addition to that, the decentralized blockchain systems are getting ready to replace the traditional banking system with higher levels of security, faster transactions, smart contacts, and lower fees.
4. Why Do Banks Adopt Blockchain?
Blockchain has a huge potential to improve the global financial status. But when you are asking this question, I would like to ask you a relevant question that is, Why should not banks adopt blockchain? If you get the answer to this, you will understand why the banks should adopt blockchain.
From its investing, Blockchain is showcasing immense potential as I have already mentioned. For every FIs or Financial institution, it promises significant savings in the transaction, administrative, and infrastructure costs.
In the financial ecosystem, it also can bring enhanced levels of accuracy, resilience, and trust. All these can bring a huge change.
The Future of Finance Made Best for All By Technology
The current traditional banking system is laden with problems because of rules and multiple limitations. Indeed, millions of people are unable to access bank accounts and or have credit cards. But everyone deserves equal chances to banking services, and blockchain is here to make that happen.
Banking is crucial, but banks are not.
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