Recently, a new entrant to this complicated world has emerged in the shape of bitcoin and blockchain. The best trading tools, quick payouts, and exceptional customer care are all available on the official website to help traders along their bitcoin journey. Though digital currencies were first designed as a decentralized system for online transactions, many commercial banks are now considering potential applications for these technologies within their traditional business models.
The financial industry is notorious for conservatism, but it’s not unheard of that old dogs learn new tricks. Here’s more on how bank executives view the evolving landscape and what they might decide to do with the power of bitcoin and blockchain technology.
1. Trading risks
Banks are not new to the world of digital currencies. Thanks to the popularity of money transfer services like Western Union, the finance industry has enjoyed a strong position in the market for online payments. Consumers can use these providers to send and receive funds in various currencies using any smartphone or computer with an Internet connection.
These commercial banks are taking a closer look at their competitors, who have recently begun accepting bitcoin and other cryptocurrencies as legal payment methods. At present, bitcoin enjoys a relatively small share of this market but has been growing steadily since its inception around 11 years ago.
In finance, currencies are often considered more than just currency. As a result, banks could benefit significantly by pursuing the development of blockchain technologies to lower operating costs and improve efficiency across their systems. It will also allow them to improve their trading capabilities. Experts have pointed out that if banks are planning to embrace bitcoin, it is crucial that they first study how these technologies can be used within their operations or even adapted for use outside of the traditional banking system.
2. Trading partnerships
Many large banks have already opened accounts with bitcoin exchanges, but most are still hesitant to do business with firms that offer digital currency trading services. The main issue is their uncertainty regarding the regulatory framework, which they would have to navigate to begin using cryptocurrencies. Technological advancements and potential cost savings are key factors driving the financial industry’s interest in bitcoin and blockchain technologies.
However, concerns about compliance costs and legal implications could hold them back from committing significant resources to these novel approaches. In general, there is a lot of ambiguity surrounding the current legal status of bitcoin worldwide, which at least appears unlikely to change soon – even with the recent changes in some jurisdictions worldwide.
3. Cutting costs
These days, banks are facing increasing pressure to reduce costs. Technology has been a critical driver of this cost-cutting push, but one area remaining resistant to all efforts so far is the cost of international transfers. To identify the most pain points and determine whether or not blockchain represents a viable solution, analysts have compared traditional bank transfer systems with those of digital currency exchanges and assessed the potential for savings in each case.
4. Building trust
Although banks are still trying to decide what role bitcoin and blockchain might play in their future operations, they must be supported that these technologies can enable them to offer better customer service. For example, it would be possible for banks to implement blockchain technology to check and track the identity of their customers at the point of sale. Some banks already offer this technology, but this approach has several drawbacks and limitations. Banks could also use blockchain technologies to improve the security of their online financial systems, increase customer trust, and reduce fraud risks.
5. Maintaining control
Banks have often felt a need to maintain complete control over their operations, so they are cautious about transferring additional powers to third-party providers or operating with a level of decentralization that would allow them to relinquish these responsibilities. The last decade has seen a lot of changes in terms of the way people and institutions use various financial services.
In many areas, new players have emerged to compete with traditional financial institutions. Even within banks, there are vital signs of change as some employees are now taking on roles that were previously left to the management teams. In addition, the emergence of decentralized platforms for processing transactions has made it possible for banks and other institutions to take advantage of the lower costs and faster processing times without sacrificing control over their processes or operations.
6. Boosting the brand value
Banks generally want to maintain a positive brand image to retain existing customers and attract new ones. Moreover, they want to establish themselves as leaders in their respective industries. Increasing public awareness of bitcoin and blockchain technologies could be a way to accomplish these goals.
By closely monitoring the developments in this new field, banks could determine whether the development of digital currencies will positively affect their businesses or if it might be adopted by other financial service providers on the market. To make the most of bitcoin and blockchain technologies, banks will have to invest time and resources into studying technological trends and developing proof of concepts based on this technology.
