Financial Technology Revolution: How Blockchain is Transforming Banking in Asia
In Asia, at the moment it is happening, the transformation of banking systems is, without a doubt, the change dictated by institutional innovation. The most important of these institutional innovations is the emergence of technology as a competitive force in the marketplace and coalition forming around new central technologies such as the emergence of blockchain. It is worth mentioning that since the inception of blockchain, many new opportunities have arisen for the transformation of the banking sector in the Asia region which is characterized by the rapid pace of technology adoption and a strong startup ecosystem.
As a senior content writer with a decade of experience in this field, I have come across changes that have taken place due to technology disruption. I must say that the technology driven market which is fragmented and more competitive also means that opportunities are endless. It is essential that the adoption and incorporation of solutions such as blockchain improves the journey of the customer since it has had some major pain points in the past especially in Asia, where the local dynamics have been quite different. This blog will help clarify some misconceptions about transformations of the banking industry across the Asian geography.
Simply put, it is a distributed database technology where transactions are recorded in different locations ie several computers. As a result, the central authority is not necessary and therefore the likelihood of fraud is closely weakened and overall security is improved. Which and will continue to be important, as Asia is several jurisdictions where many are focused on upgrading their financial infrastructures. In fact by bringing in blockchain it is able to assist in speeding up the procedures and giving guarantees to the consumers.
Improving international money transactions is one of the greatest contributions of adopting blockchain technology in the financial sector. Banks and financial institutions in many cases are slow in processing international transactions since it goes through several parties which require high fees and increase transaction duration. Blockchain, on the other hand, allows for better cross border transactions instantly and at a very low cost. This is a key factor in the Asia continent particularly where many people depend on remittances for financial sustenance. Through blockchain technology, banks can be in the position to process payments in an easier, cheaper way but more so within a short span of time.
Additionally, blockchain increases the economic participation of the masses, which remains a major concern in Asia. It is estimated that there is still a sizeable fraction of the population without bank accounts, and this means that there are billions of people without access to banking services, but on the positive note, this means that there is a huge target market for blockchain services, which can provide more independence for people who don’t have access to a bank. Blockchain apps on mobile phones can provide simple banking services, including saving and lending opportunities through micro loans. This enables wider access to financial products for the underserved population and greater economic contribution from these communities.
Apart from cutting the costs and expanding the scope of financial transactions, Blockchain promotes privacy and protection of information. As society advances to a stage where data leaks and impersonation become widespread, people are becoming more worried about the confidentiality of their funds, security of their financial data. Blockchain offers a strong counter measure by making sure the details of the transaction are permanently fixed and appropriately protected through encryption. This not only safeguards the consumers but also enhances confidence in the banking institutions, which is critical for longevity.
Another sector where blockchain is starting to create an impact is with respect to compliance. Banks in Asia have to adhere to strict regulations and complying with them is cumbersome and time consuming. Under this highly sensitive regime, compliance with laws and requirements is simplified through a clear and verifiable record of transaction history which makes it easy for banks to show that they have complied with regulations. This can result to lower running costs, enhanced effectiveness of activities making it easier for the banks to invest and serve the market.
The reality is that the marriage between banks and blockchain will inevitably alter the economic narrative for the world, however, it cannot be smooth sailing for them due to multiple hurdles which they must cross to make that transition smooth. They need to have a clearer framework of how everything works, currently when it comes to blockchain many Asian governments aren’t sure how to regulate those assets. Without guidelines or some form of a framework in place, it could likely breed uncertainties for the banks and result in negative consequences in regards to the use of that technology. It is critical to note however, that for that adoption to deepen there is a dire need for integration between banks, technology workshops and regulators alike to set standards that will accommodate the adoption process of blockchain in an enduring fashion.
Even then, there is a concern of whether they would be able to scale their operations to meet the high transaction demand never mind reducing the workload. Technology enthusiasts might drool at the solutions that clients around the world want, but it is pretty obvious that deploying it everywhere and anywhere the turnover would be extensive and I doubt that any region across Asia would be capable of deploying it without losing quality, so there needs to be a refined approach across the board in that regard.
Also, it is pretty much understood that there are gaps that exist while adopting any kind of technological advancement. It is the responsibility of financial institutions to provide adequate training and resources so that proper utilization can be made out of blockchain technology. But, as the sector grows, we will also witness more and more efforts in education that will prepare specialists to work in banks oriented to blockchain technologies in the future.
To summarize, the financial technology revolution driven by blockchain, will change the face of banking in Asia in a big way as we see it. Whether it is increasing the efficiency of transactions or deepening the extent of financial inclusion and enhancing security features, the advantages are plenty. However, many areas regarding the regulatory, the scalability and the education limitations need to be considered in order to make an effective incorporation of blockchain into the banking sector. The concerted interaction of fintech companies with banks and regulators will help to more fully realize the potential of blockchain, which will develop more modern approaches to the organization of the Asian financial market.
