IMPACT AND
POTENTIAL OF
BLOCKCHAIN ON THE
BANKING SECTOR
Presented By: Guided By:
DEBASHISH MAHATO Mrs. Madhusmita Das
2261020089 (Asst. Professor)
CONTENTS:
• Introduction to Blockchain
• Properties of DLT
• Benefits of Blockchain in Banking
• Practical Cases in Banking
• Challenges and Risks
• Future of Banking with
Blockchain
• Regulatory Considerations
• Conclusion
• References
• Q&A
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INTRODUCTION
•It is a revolutionary technology that's transformed how we think about
data storage, security and transactions. At its core, it's a decentralized,
distributed ledger system that records transactions across a network of
computers. Each transaction or block is cryptographically linked to the
previous one forming a chain hence the name "blockchain."
•This technology gained prominence as the underlying system for
cryptocurrencies like Bitcoin. However, its applications extend far
beyond finance. It ensures transparency, immutability and security by
design. Blockchain eliminates the need for intermediaries in transactions
fostering trust in peer-to-peer interactions.
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WHAT IS BLOCKCHAIN?
Blockchain is a distributed ledger technology that consists of a chain of blocks, each containing a
list of transactions. It is a decentralized and transparent system designed to securely record and
verify transactions across a network of computers. In a blockchain, data is stored in a way that
ensures its integrity, making it extremely resistant to modification. This technology underpins
cryptocurrencies like Bitcoin but has applications far beyond digital currencies, including in
industries like finance, banking, healthcare, supply chain management, and more.
KEY FEATURES:
• Decentralization
• Security
• Transparency
• Immutability
• Smart Contracts
• Efficiency
• Global Accessibility
• Public or Private
• Interoperability
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COST REDUCTION:
PRIVATE KEYS: Users control
HOW DOES BLOCKCHAIN Reducing transaction costs,
their private keys, which grant
WORK IN BANKING improving efficiency, and
ownership and access to their
SECTOR? potentially accelerating cross-
assets.
border payments.
TRANSPARENT AND
ENHANCED SECURITY:
DISTRIBUTED LEDGER: IMMUTABLE: Ensuring
Offering improved security
Utilizing a decentralized, transparency and immutability of
through decentralized, tamper-
distributed ledger to record and transaction data, making it
resistant data storage and
store all transactions. resistant to fraud and
cryptographic verification.
manipulation.
SMART CONTRACTS:
TRANSACTIONS IN TRUST AND
Implementing self-executing
BLOCKS: Transactions are TRANSPARENCY: Increasing
smart contracts to automate
grouped into blocks, which are trust and transparency among
processes, enforce agreements,
time-stamped and linked together network participants and
and reduce the need for
in a chain. stakeholders.
intermediaries.
CONSENSUS
CRYPTOGRAPHIC CHALLENGES: Facing
MECHANISMS: Network
SECURITY: Employing challenges related to scalability,
participants use consensus
cryptographic techniques to regulation, and data privacy,
mechanisms (e.g., proof of work
secure and protect data, ensuring which require careful
or proof of stake) to validate and
tamper-proof records. consideration in implementation.
agree on transactions.
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BLOCKCHAIN VS. TRADITIONAL BANKING
Traditional Banking:
• Centralized institutions.
• Intermediaries for transactions.
• Limited transparency.
• Vulnerable to cyberattacks.
• Geographical constraints.
• Slower, costlier cross-border transfers.
• Highly regulated.
Blockchain-Based Banking:
• Decentralized, no central authority.
• Peer-to-peer transactions.
• Transparent, public ledger.
• High security through cryptography.
• Global accessibility.
• Faster, cheaper cross-border transactions.
• Less regulatory oversight (varies).
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PRACTICAL CASES IN BANKING
Here are few successful blockchain implementations in the banking sector.
• JPMorgan Chase's Quorum
• We Trade
• Ripple
• HSBC's Project Contour
• IBM World Wire
• AXA's Fizz
• Banco Santander's Proxy Voting
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Security Concerns: Regulatory Challenges:
• Immutable transactions pose • Uncertain and evolving global
correction challenges. regulations.
CHALLENGES AND RISKS • Smart contract vulnerabilities can • Balancing AML/KYC compliance
lead to losses. with privacy on a transparent
• Custody risks related to private ledger.
keys.
Scalability Issues: Data Privacy: Lack of Standards:
• Network congestion and slow • Balancing transparency on public • Interoperability and consistency
transaction times. blockchains with privacy issues due to the absence of
• Energy consumption concerns. requirements. standardized protocols.
• Interoperability challenges among
different blockchains.
Market Volatility: Legal and Liability Education and Talent:
• Cryptocurrency price fluctuations Concerns: • Shortage of blockchain expertise in
impacting financial operations. • Underdeveloped legal frameworks the banking industry.
for smart contract enforcement.
Resistance to Change:
• Integration challenges with existing
legacy systems.
• Resistance to blockchain adoption
in traditional banking institutions.
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THE FUTURE OF BANKING WITH BLOCKCHAIN
• Digital Currencies and CBDCs
•Cross-Border Payments
•Decentralized Finance (DeFi)
•Enhanced Security and Privacy
•Smart Contracts and Automation
•Tokenization of Assets
•Sustainability and Green Finance
•Integration with AI and IoT
•Supply Chain and Trade Finance
•Regulatory Frameworks.
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BLOCKCHAIN AND DIGITAL IDENTITY
The rise of blockchain technology and the growing interest in digital identity management (DIM) suggest that blockchain may soon be the
foundation for the digital economy.
Advantages Of Using Blockchain For Dim:
• Decentralization
• Immutability
• Transparency
• Resilience
Challenges And Mitigation Strategies In Implementing Blockchain For Dim:
• Interoperability
• Adoption and Trust
• Regulatory and Legal Considerations
• Data Security
• Future Directions
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THE ROLE OF SMART CONTRACTS
Smart contracts are self-executing contracts with the terms of the
agreement directly written into code. They facilitate and automate the
performance of specific contractual obligations.
Benefits in Banking
• Increased Efficiency
• Reduced Fraud and Error
• Improved Security
• Cost Savings
Implementation Challenges
• Integration with Existing Systems
• Ensuring Compliance
• Adaptability
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CONCLUSION
Blockchain technology has fundamentally transformed banking by bolstering security,
efficiency, and transparency. Its potential lies in revolutionizing financial inclusion, asset
tokenization, CBDCs, supply chain finance, and regulatory compliance. While
challenges persist, blockchain's ongoing integration promises a future of safer, more
accessible, and streamlined banking operations.
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• https://doi.org/10.1109/TEM.2019.2948142
• https://www.thenationalnews.com/business/technology/blockch
ain-to-boost-regional-banks-efficiency-and-cut-costs-1.765312
REFERENCES • https://www.researchgate.net/publication/344954493_Block
chain_in_Banking_Industry
• https://www.simplilearn.com/tutorials/blockchaintutorial/
blockchain-technology
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THANK YOU!
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