Loans and repayments were handled in person before banks existed. Trust was a big part of these kinds of deals.
Blockchain is a revolutionary technology that many people are unfamiliar with, but it has the potential to replace and challenge our current financial structures and borrowing and lending practices.
Blockchain is designed to be decentralized by design and is built on a distributed ledger. This helps make peer-to-peer lending easier and eliminates middlemen. In order to assist some of its customers in concentrating on providing loans backed by cryptocurrencies, DLT Labs has provided individualized solutions.
We examine how certain loan providers can utilize blockchain in novel and improved ways to conduct business, despite the fact that widespread adoption of the technology may still take a few years.
Automation of loan approval procedures
The utilization of blockchain technology has the potential to expedite the credit card and loan application approval procedures, which are currently costly and time-consuming for lenders.
Credit scores, bank statements, and pay stubs all play a significant role in loan approval. However, it’s possible that their significance will diminish as blockchain technology is implemented.
Banks, financial institutions, and lenders will be able to verify counterparts’ authenticity with the help of smart contracts, and they will be able to carry out routine account management tasks in less time than they did before. This will reduce costs and speed up this part of the banking process.
If the banking environment used by online lenders is secure, they may be able to increase customer loyalty and confidence.
Possibility of faster payments
Customers may now receive their payments much more quickly than they did previously, similar to a faster approval. A certain loan amount can be processed within 15 minutes by some businesses and financial institutions.
While this is quick, blockchain technology allows for instantaneous money transactions. Utilizing blockchain, loan companies would be able to circumvent centralized banking’s conventional barriers and provide immediate financing upon approval by eliminating intermediaries, which would also reduce trading costs and speed up the transfer of securities and payments.
Enhanced safety
With the increasing frequency of cyberattacks and online fraud each year, the idea of blockchain and a cutting-edge banking system holds a lot of promise for online security.
Blockchain is a distributed ledger that is nearly impossible to hack because it stores all transaction records on the computers of multiple users.
Implementing blockchain-based solutions makes it simple to comply with GDPR regulations and processes like “e-KYC” (Know Your Customer) that enable better protection of consumer data. Loan providers would be able to better defend themselves against cyberattacks and fraud as a result of this. Client data can be stored on multiple blockchain blocks, reducing threats to customer data.
If the banking environment used by online lenders is secure, they may be able to increase customer loyalty and confidence.
We might see loan companies lending to customers from all over the world, not just from their own country, in the future. In a blockchain environment, there is no reason why a lender in India couldn’t approve a loan for someone on the other side of the world.
If blockchain is used to facilitate this, customers will have access to a wider range of products from around the world.
Although transparency is one of the advantages of blockchain, this is still a relatively new idea. This indicates that there are still no established usage guidelines.
Some nations, including Australia, New Zealand, Ukraine, Japan, Canada, and others, accept crypto currencies as payment and are working to update their policies, rules, and regulations. whereas some have outright prohibited them (China, Iceland, Bolivia, etc.). Then there are some, like Malaysia, Belgium, and others, that have cautioned the general public against using crypto currencies. Despite the fact that widespread adoption is essential to the spread of blockchain technology, the state of its immediate application is still somewhat hazy in many nations.
Similar to banking, these rules that are put into place and followed by governments can help raise public trust in the industry while also encouraging businesses to come up with new ideas and use blockchain-based solutions.
Conclusion
In the future, Bitcoin, Ethereum, and other cryptocurrencies of a similar nature may emerge as the preferred form of currency for both customers and lenders. Loans backed by a person’s cryptocurrency assets are already offered by some businesses.
However, how exactly would this appear in the real world?
A loan, for instance, is secured by the value of one’s cryptocurrency portfolio or collection. In such instances, the crypto assets of the loan applicant are seized and held until the loan and interest are paid off. The rise in the value of cryptocurrencies, which enables such lending institutions to maximize their profit, is essential to this kind of banking model’s success.
Due to the fact that a blockchain network does not have any geographical limitations, lenders from all over the world are able to bid for a loan, which is one advantage of decentralized lending. This means that a borrower can access competitive funding with just one request. But banks and individual loan providers aren’t the only ones who can benefit from blockchain technology. Additionally, this technology may be of assistance to larger institutions in streamlining and optimizing their operations.
How?
With complete transparency and a view of their finances in real time on an immutable ledger, customers are able to connect directly to their preferred bank or lending institution. This ensures that less time-consuming and costly due diligence is required, which is advantageous to the borrower.
Blockchain adoption is not a question of “if,” but rather “when,” as entrepreneurs, banks, and lending institutions continue to invest in the technology.
I appreciate you reading!
AUTHOR DETAILS:
| ashanag06@gmail.com | |
| First Name | Asha |
| Middle Name | – |
| Last Name | H N |
| Phone | 8050255446 |
| Street | Pramod Layout, |
| City | Bangalore |
| Country | India |
| Occupation | private job |
| Material | married |
| Gender | female |
| Birthdate | 31may1985 |
| Nationality | india |
| Children | yes |
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