Importance of Virtualization in Financial Institutions
There are several reasons why there is a need to virtualize the financial institution.
A transaction can be done in a few seconds using blockchain compared to the initial financial system that we have at the moment. There are some instances where transactions could have taken at least a week to settle the payment. In blockchain technology, it reduces the time spent and the money needed. Another thing is that blockchain technology eliminates the middle office and back-office staff of the banks. Because transactions are completed online with a few clicks, they're already performed and settled.
Greater Quality of Financial Products
Cryptocurrency generates the crowdfunding medium and using blockchain technology resulting in a huge excessive amount and could give a lot of solutions to many common problems. Several distinctive kinds of fundraising have appeared as a consequence of the launch of blockchain technology and its integration in the crowdfunding sphere.
An interesting example is the improvement of money circles, also known as the "Rotating Savings and Credit Association" (ROSCA) where a group of people is saving and borrowing money together. This takes place through benefaction and pullout from and to the common fund. It functions as an unofficial financial institution, often involving a good deal of mistrust. Blockchain has the capacity and effectiveness to add the trust of these so-called money circles.
Reduced Counterparty Risks
When transactions are resolved almost in an instant, it eliminates an important portion of the danger that the counterparty will not be able to fulfil its commitments, which could be an important cost for banks.
An example like AZ FundChain (this is an application in blockchain for crowdfunding and money circles) utilizes the blockchain technology to further improve the transparency and trust among cash circle contributor. AZ Fundchain utilizes social badges to gain confidence and handle on-line a high reputation because customers can leave reviews. The project focuses on adding a beneficial effect on current social cash circles to enhance local communities and provide a conflict-free atmosphere.
AZ FundChain is powerful that it can search for a cash circle outside your local community and filter for particular quantities and targets. This provides you with the capacity to find the ideal circle of cash that fits your requirements.
All parameters of the cash circle are set in an intelligent transaction agreement. Its transactions are carried out using the old AZ token, which is the source of the FundChain.
Upgrading the Contract Performance
Using smart contracts can lessen the time to complete the financial process or transaction because the smart contract permits a bank to automate the transaction and process.
The use of smart contracts and blockchain process flow, including transactions in technology significantly increases transparency. The entire financial flow is registered on the chain and can be audited by any party.
The transparency in financial virtualization is useful, however, it can also be risky. Financial transparency is needed, but not all participants want this. Clients do not want to disclose private information online.
Several privacy-oriented alternatives have therefore been created.
Sending money to someone from another country can sometimes be very difficult especially when the location of the country does not have a remittance center. There are some countries thou wherein remittance can be accepted through banks. Traders, business owners, and consumers are sending hundreds of billions of euro worldwide annually, and the traditional technique has been slow-moving, bureaucratic and very expensive.
Bitcoin offers an "alternative" way to move cash. Mainstream banks do not like the concept of using volatile cryptocurrency without any regulation. However, several significant banks have partnered with Ripple or Stellar to enable cross-border payments using blockchain technology.
Self Sovereign Identity Blockchain fights hacking, DDoS (Distributed Denial of Service) attacks and other kinds of fraud. It can also help the bank and others to recognize individuals easily and precisely by a digital blockchain-enabled ID. With less fraud, the company's sales activities increase.
Blockchain Technology is considered quite new, even though banks, business, and other industries are already innovating with it. Technology may be ahead of regulation at this time, however, it is not always clear what to expect in terms of safety, privacy, possible dangers, and dispute resolution.