Connect with us

Politics

What’s the Role of Smart Contract in the Banking Industry? – ReadWrite

Published

on

Smart Contract


Blockchain technology has left an incredible impact on many different sectors. Governments and businesses are looking towards leveraging blockchain technology in their operational activities to gain efficiency. Blockchain is popular in the global market due to cryptocurrencies, but there are numerous possibilities at the core of blockchain.  And one of the possibilities that caught the attention of the banking industry is the Smart Contract. 

What is a Smart Contract?

Smart contracts are programs saved on the blockchain that operate when predetermined conditions are met. They are used for the automation of agreement execution. It helps participants to determine the outcomes immediately without any involvement from intermediaries. After sufficing the conditions, it triggers the next event automatically. Moreover, based on the PR Newswire report, the smart contracts market size will reach $345.4 Million by 2026 at a CAGR of 18.1%. 

Smart contracts work by following simple “if / when…then…” statements, which are written in code on the blockchain.

When the predetermined conditions are met and verified, the computer network operates. These actions may include issuing funds to appropriate parties, sending notices, or issuing fines. After the task is completed, it automatically updates the blockchain. This means that the transaction cannot be changed. And only the approved parties can see the result that can be highly helpful to avoid attacks from cybercriminals.

To complete the task and satisfy the participant’s need, a smart contract can possess multiple provisions. First, to establish the terms, participants should define the representation of transactions and data on the blockchain. After that, they need to agree to the “if/when… then…” rules governing these transactions, and explore all possibilities and define the resolution of the dispute frame.

So, Exactly What Smart Contracts will Change?

Smart contracts are designed to automate transactions and allow participants to agree on an event’s conclusion without a central authority. The following are some of the most important characteristics of smart contracts: Oracle inputs, programmability, Multisig  authentication, and escrow capability:

  • A smart contract is a type of contract that runs automatically depending on pre-programmed logic.
  • Multisig allows two or more contract parties to independently approve the execution of a transaction. Therefore, it is also essential for multi-party contracts.
  • Escrow easily locks the fund with a mediator and only unlocks them after both parties have accepted the conditions. External inputs, such as prices, performance, or other real-world data, may be necessary to conduct a transaction at times. So, using oracle services, banks can assist smart contracts with these inputs.

In the majority of circumstances, distributed ledger smart contract system would make the greatest sense for the financial services industry. This is because the smart contract will assure the connection between all essential stakeholders is on a secured, private, and scalable platform.

  • Transacting Parties: Individuals or organizations that want to be a part of the contract.
  • Banks, capital market participants, and insurers: Depending on the use case, they can engage and operate as transaction validators and asset custodians.
  • Regulators: they can have access to view all transaction records to keep an eye on the systems.

Source

The value of this model of the smart contract will expand among all the crucial financial services segments, i.e., it will become available across value chains. Moreover, it will bring enhanced value in cost savings, risk reduction and efficiencies.

Smart Contracts Opportunities in Banks

Even in today’s digital world, contractual agreements (where the third party imposes the terms) is the basis for banks to perform their activities. However, giving significant attention to each customer can slow down the process while costing a fortune. On the other hand, having these terms on the blockchain network where contracts automatically execute provides numerous opportunities for the banks. 

When blockchain contracts automatically execute the provisions of a contract — a contract may actually be carried out.

Transparent Auditing

The traditional contracts are usually based on critical regulations that require the banking sector to spend much time doing paperwork for record-keeping. Record keeping is also the reason behind dull digitization in the banking sector.

Besides, as banks offer several services like providing loans and other financial transactions, it becomes compulsory to record everyday activity. However, cyber-attacks on the records can easily manipulate the data and lead to incorrect information. 

Is the Blockchain Role in Advertising Too Overrated?

With smart contracts solutions, banks can acquire vital tools for bookkeeping in the blockchain network. Furthermore, for the improvement in transparency of the record, we use distributed solutions in the network. This helps banks get rid of infiltration in the account records and eliminates any chances of fund loss from an organization. 

Easier Insurance Claims Processing

Settlement of the insurance claims requires the legitimacy assessment of the claim received while counter-checking the contract terms for validation. The traditional process to claim the insurance can drag a lot of time and energy, if one wants to avoid fraud claims. 

Although using blockchain technology-based smart contracts, banks can automatically process insurance claims by allowing a consumer to file a claim and validating the claim via provided codes in the blockchain network. To validate the insurance claims, the blockchain network system access the claims, verify their legitimacy and execute the contract’s terms. 

Faster & Efficient KYC (Know Your Customer) Formalities

At the time of offering a loan or funding trade to the customer, banks must verify the customer’s identity. And the process of gaining information like credit history from other institutions can be difficult as well as costly for banks. 

Is Blockchain the New Buzzword in Healthcare? 8 Real-life Applications

Hence, the adoption of smart contracts for those operations can easily provide an individual’s credit score by verifying the customer identity based on blockchain records. In addition, it will also offer compliance requirements for customers by processing the transactional statement of the customer in real-time. 

Real-time Remittance

Banks process several transactions of multiple customers. However, the processing of transactions might slow down with piling data. While implementing smart contracts along with remittance in the system can ease the process of fund transfers among stakeholders and customers and payment done to suppliers. Not only that but, smart contracts can also help in speeding up the settlement process of post-trade. 

Shaping the future through collaboration

Banks are about to gain significant profit with the adoption of smart contracts for their systems. Smart contracts are so much more than just being an additional intelligent method to handle different contacts. With its adoption, banks will easily create an improved public relations with consumers while offering impressive satisfaction to the customers. 

But that’s not all; building a system based on smart contracts will give benefits like standardization of code and execution to minimize the cost of agreements as well as negotiations; security of the transactions through encrypted distributed ledger stored in blockchain; built-in regulatory compliance, new regulatory models for reporting, a well-developed contract that reduces risk in the settlement or counterparty, and lastly, automation of the digital payments and assets flow that might have new business products or models.

Despite all of the positives that come with Smart Contracts in banking services, the need for implementing blockchain technology in the system might not be easy. So, to gain maximum profit from the system without being vulnerable to cyber attacks, it is beneficial to seek help from expert developers in blockchain technology. 

It will be exciting to watch what the future of banking with smart contracts will look like and how banks will improve the accuracy and validity of transactions around the world. 

Mahipal Nehra

Digital Marketing Expert

Working with Decipher Zone Softwares that is a Java Development Company. He always loves to write about technical insights, tools for data analysis, emerging technological trends, AI-based commuting services, robots, web applications, CRM, and digital transformation IT solutions.

Politics

Fintech Kennek raises $12.5M seed round to digitize lending

Published

on

Google eyed for $2 billion Anthropic deal after major Amazon play


London-based fintech startup Kennek has raised $12.5 million in seed funding to expand its lending operating system.

According to an Oct. 10 tech.eu report, the round was led by HV Capital and included participation from Dutch Founders Fund, AlbionVC, FFVC, Plug & Play Ventures, and Syndicate One. Kennek offers software-as-a-service tools to help non-bank lenders streamline their operations using open banking, open finance, and payments.

The platform aims to automate time-consuming manual tasks and consolidate fragmented data to simplify lending. Xavier De Pauw, founder of Kennek said:

“Until kennek, lenders had to devote countless hours to menial operational tasks and deal with jumbled and hard-coded data – which makes every other part of lending a headache. As former lenders ourselves, we lived and breathed these frustrations, and built kennek to make them a thing of the past.”

The company said the latest funding round was oversubscribed and closed quickly despite the challenging fundraising environment. The new capital will be used to expand Kennek’s engineering team and strengthen its market position in the UK while exploring expansion into other European markets. Barbod Namini, Partner at lead investor HV Capital, commented on the investment:

“Kennek has developed an ambitious and genuinely unique proposition which we think can be the foundation of the entire alternative lending space. […] It is a complicated market and a solution that brings together all information and stakeholders onto a single platform is highly compelling for both lenders & the ecosystem as a whole.”

The fintech lending space has grown rapidly in recent years, but many lenders still rely on legacy systems and manual processes that limit efficiency and scalability. Kennek aims to leverage open banking and data integration to provide lenders with a more streamlined, automated lending experience.

The seed funding will allow the London-based startup to continue developing its platform and expanding its team to meet demand from non-bank lenders looking to digitize operations. Kennek’s focus on the UK and Europe also comes amid rising adoption of open banking and open finance in the regions.

Featured Image Credit: Photo from Kennek.io; Thank you!

Radek Zielinski

Radek Zielinski is an experienced technology and financial journalist with a passion for cybersecurity and futurology.

Continue Reading

Politics

Fortune 500’s race for generative AI breakthroughs

Published

on

Deanna Ritchie


As excitement around generative AI grows, Fortune 500 companies, including Goldman Sachs, are carefully examining the possible applications of this technology. A recent survey of U.S. executives indicated that 60% believe generative AI will substantially impact their businesses in the long term. However, they anticipate a one to two-year timeframe before implementing their initial solutions. This optimism stems from the potential of generative AI to revolutionize various aspects of businesses, from enhancing customer experiences to optimizing internal processes. In the short term, companies will likely focus on pilot projects and experimentation, gradually integrating generative AI into their operations as they witness its positive influence on efficiency and profitability.

Goldman Sachs’ Cautious Approach to Implementing Generative AI

In a recent interview, Goldman Sachs CIO Marco Argenti revealed that the firm has not yet implemented any generative AI use cases. Instead, the company focuses on experimentation and setting high standards before adopting the technology. Argenti recognized the desire for outcomes in areas like developer and operational efficiency but emphasized ensuring precision before putting experimental AI use cases into production.

According to Argenti, striking the right balance between driving innovation and maintaining accuracy is crucial for successfully integrating generative AI within the firm. Goldman Sachs intends to continue exploring this emerging technology’s potential benefits and applications while diligently assessing risks to ensure it meets the company’s stringent quality standards.

One possible application for Goldman Sachs is in software development, where the company has observed a 20-40% productivity increase during its trials. The goal is for 1,000 developers to utilize generative AI tools by year’s end. However, Argenti emphasized that a well-defined expectation of return on investment is necessary before fully integrating generative AI into production.

To achieve this, the company plans to implement a systematic and strategic approach to adopting generative AI, ensuring that it complements and enhances the skills of its developers. Additionally, Goldman Sachs intends to evaluate the long-term impact of generative AI on their software development processes and the overall quality of the applications being developed.

Goldman Sachs’ approach to AI implementation goes beyond merely executing models. The firm has created a platform encompassing technical, legal, and compliance assessments to filter out improper content and keep track of all interactions. This comprehensive system ensures seamless integration of artificial intelligence in operations while adhering to regulatory standards and maintaining client confidentiality. Moreover, the platform continuously improves and adapts its algorithms, allowing Goldman Sachs to stay at the forefront of technology and offer its clients the most efficient and secure services.

Featured Image Credit: Photo by Google DeepMind; Pexels; Thank you!

Deanna Ritchie

Managing Editor at ReadWrite

Deanna is the Managing Editor at ReadWrite. Previously she worked as the Editor in Chief for Startup Grind and has over 20+ years of experience in content management and content development.

Continue Reading

Politics

UK seizes web3 opportunity simplifying crypto regulations

Published

on

Deanna Ritchie


As Web3 companies increasingly consider leaving the United States due to regulatory ambiguity, the United Kingdom must simplify its cryptocurrency regulations to attract these businesses. The conservative think tank Policy Exchange recently released a report detailing ten suggestions for improving Web3 regulation in the country. Among the recommendations are reducing liability for token holders in decentralized autonomous organizations (DAOs) and encouraging the Financial Conduct Authority (FCA) to adopt alternative Know Your Customer (KYC) methodologies, such as digital identities and blockchain analytics tools. These suggestions aim to position the UK as a hub for Web3 innovation and attract blockchain-based businesses looking for a more conducive regulatory environment.

Streamlining Cryptocurrency Regulations for Innovation

To make it easier for emerging Web3 companies to navigate existing legal frameworks and contribute to the UK’s digital economy growth, the government must streamline cryptocurrency regulations and adopt forward-looking approaches. By making the regulatory landscape clear and straightforward, the UK can create an environment that fosters innovation, growth, and competitiveness in the global fintech industry.

The Policy Exchange report also recommends not weakening self-hosted wallets or treating proof-of-stake (PoS) services as financial services. This approach aims to protect the fundamental principles of decentralization and user autonomy while strongly emphasizing security and regulatory compliance. By doing so, the UK can nurture an environment that encourages innovation and the continued growth of blockchain technology.

Despite recent strict measures by UK authorities, such as His Majesty’s Treasury and the FCA, toward the digital assets sector, the proposed changes in the Policy Exchange report strive to make the UK a more attractive location for Web3 enterprises. By adopting these suggestions, the UK can demonstrate its commitment to fostering innovation in the rapidly evolving blockchain and cryptocurrency industries while ensuring a robust and transparent regulatory environment.

The ongoing uncertainty surrounding cryptocurrency regulations in various countries has prompted Web3 companies to explore alternative jurisdictions with more precise legal frameworks. As the United States grapples with regulatory ambiguity, the United Kingdom can position itself as a hub for Web3 innovation by simplifying and streamlining its cryptocurrency regulations.

Featured Image Credit: Photo by Jonathan Borba; Pexels; Thank you!

Deanna Ritchie

Managing Editor at ReadWrite

Deanna is the Managing Editor at ReadWrite. Previously she worked as the Editor in Chief for Startup Grind and has over 20+ years of experience in content management and content development.

Continue Reading

Copyright © 2021 Seminole Press.