Amalgamation of Blockchain and Big Data for the Retail Banking Industry
What is Blockchain?
A blockchain is a database that holds coded blocks of data and then links them together to produce a merged view and data repository. It is a decentralized, undeviating ledger that simplifies monitoring assets and logging transactions in a corporate system. By recording and trading anything valuable on a blockchain platform, all concerned parties avail risk minimization and cost reduction.
Blockchain is excellent for distributing the information required by financial service providers. It delivers instantaneous, shareable, and transparent information stored on an irreversible database that only authorized network users can access. Orders, payments, accounts, operations, and so much more can also be tracked.
The innate safety precautions and public database make blockchain a must-have innovation for all industries.
What is Big Data and its Use in Retail Banking?
Big data is data of more variety that arrives in larger volumes with great velocity and has an inherent value that provides veracity. These large data sets from multiple sources are beyond the capabilities of conventional data processing technologies. However, leveraging it can solve business challenges that were previously unclear.
- Big data has now become a form of capital. Recent technical developments such as data storage through cloud enablement and management have lowered the cost, allowing more reliable and realistic business decisions to be made.
- Banks can use Big Data to draw judgements about client diversification and the composition of their income and expenditures, analyze their transaction networks, gather feedback reviews and opinions, evaluate potential threats, and avoid fraud.
- Financial organizations make use of Big Data analysis, effectively recognize their customers’ demands and make more informed choices resulting in more economical and timely responses to consumer requirements.
- Some banks create AI-powered apps that provide customers with financial knowledge, spending, saving, and investment counseling depending on individual needs by leveraging Big Data Analysis.
Potential of Blockchain in Retail Banking
Systems using blockchain solutions are a potential disruptor for the retail banking industry. To stay ahead of this digital transformation while reaping benefits, major financing organizations, such as investment firms, stock exchanges, and banks are developing their own blockchain-based alternatives.
With blockchain the following is possible:
- Payments and Remittances: Enable quicker transactions, requiring only internet access. And at modest charges, averaging at a few cents per transfer versus wire agencies by providing a distributed payment ledger.
- Loans and credit: Borrowing money is safer and offers reduced interest rates by eliminating the need for mediators. By combining blockchain with the IoT, banks can maintain treaty rights without dispute.
- Customer KYC and Fraud Prevention: Easier and safer to share data among retail banking firms by collecting customer information on distributed blocks. Blockchain also provides a digital fingerprint to use as personalized identification.
- Clearance and Settlement Systems: Decentralized ledgers have the potential to minimize operational expenses while also pushing real-time exchanges across banking institutions, speedily and securely.
- Securities: Tokenizing classic securities like stocks, bonds, and alternative investments on public blockchains builds more streamlined and compatible capital markets.
- Trade Finance: Increased clarity, integrity, and confidence between international trade participants by automating the time-consuming, documented bills of lading procedures.
- Fundraising: Initial Coin Offerings (ICOs) are testing a new funding model that disengages access to capital from conventional investment services and corporations.
Advantages of Integrating Blockchain with Big Data
The utilization of Blockchain and Big Data in collaboration has the potential to produce unrivaled results for businesses of all sizes.
There are significant advantages of using blockchain technology to serve Big Data analytics systems.
- Data quality: Blockchain improves data quality by providing wholesome and structured storage. This reduces errors and promotes detailed analysis, resulting in valuable and trustworthy insights to make business decisions.
- Cost Saving: Big Data analytical models with blockchain solutions can significantly reduce maintenance costs. Incorruptible information becomes a corporate asset as it provides error-free data, which can help with cost-saving.
- Data Security: Blockchain ensures no individual has power over it and no one can change it without the consent of all parties included. This increases visibility throughout the system and reduces theft, issuing sturdy security to Big Data.
- Concurrent Insights: The merging of blockchain with Big Data will benefit banks by making real-time analytics more workable and accurate. The introduction of blockchain to AI and new data analytics will allow satisfying these immediate needs.
- Fraud Prevention: Once banks use blockchain to execute operations, they can assess risk and detect dubious patterns in real-time. This will help safeguard banks and their clients from fraud and protect Big Data effectively.
- Data Access: Blockchain can boost Big Data analytics by minimizing the time of data access. Users from multiple departments of an enterprise can be added to the blockchain, allowing them to access the data needed for the data analysis.
- Data Efficiency: Processing data can be streamlined and done faster by storing Big Data on a circulated platform like Blockchain. This can speed up analysis, transaction time and reduce costs by overcoming the barriers of security.
The Way Forward
Blockchain technology has the potential to add value to key components of the retail banking business model. Retail banks have been hesitant to take part as the technology poses hurdles regarding infrastructure, the fragility of cryptocurrencies, and credibility. Unfortunately, there are scant signs that functionaries understand the need for collaboration and data sharing.
Thus three factors have been noticed that could aid in increasing adoption:
- Establish a more frictionless crossover between cash and digital currencies so that consumers don’t take a hit while switching over. One approach would be for central banks to create a crypto-fiat currency that would allow for real-time community transfers and cross-border financial clearing and settlement.
- Policies are essential to provide users with confidence about crypto assets, standards of participation, and investor protection.
- Generation of customer IDs on the blockchain will allow banks to make immediate loan judgements based on validated identification.
Finally, management must trust that the protracted rewards of blockchain outweigh the costs. A deep perspective and preparation for the likelihood of blockchain contributing to the depletion of some funding sources must be accepted. The best way to overcome these worries is to focus your attention on the prize: lowered costs, reduced congestion, and a secure retail banking system.
Softwares such as Hadoop Big Data or Big Data Spark conduct database migration to an inclusive storage platform smoothly. SAP consulting, as well as SAP HANA, can help banks with analytics, getting real-time insights, and making quality decisions. Banks can establish cyber security and data governance with the best in market tools, such as Microsoft 365 and Azure. With tools such as Azure Machine Learning, AWS, and Microsoft Cognitive Services, any retail banking organization can adopt Artificial Intelligence and IoT.
Techminds can help you with managed IT services and IT support to integrate the most appropriate and compatible technologies with your organizational infrastructure