Abstract
Nowadays banking industry has been highly impacted by economic and digital transformation. The application of digital innovation to financial accumulation, transaction, and monetary concerns has been obtained. Blockchain technology including cryptocurrency is known as that particular technology, an innovation that promises to fill any financial management and transaction gap with its application in the sector. This report aims at the fundamental research on the implementation of blockchain technology and innovation and its impact on the UK-based banking system. To understand the technology this particular research has been made to settle down all the functions with the anatomy and model of blockchain form and design. With the concerning analyses which have already been made on this topic taken here as the evidence of application and impact which help to conclude about its success, satisfaction and any issues which need serious steps and recommendations to deal with this.
Introduction
Before going into an in-depth understanding of the implementation of blockchain technology in the concerning country-specific banking sector its important to know what blockchain technology is and how it works. According to (Zheng et al., 2017), blockchain technology is known as the chain of blocks which contain information. The data or information have been stored inside the block based on the type of blockchain. Taken as an example, bitcoin is known as the blockchain which contains the information of the sender and receiver along with the number of bitcoins that are considered to be transferred. This implies an immutable and shared ledger that facilitates the process of recording banking transactions and also tracks the assets in the business networks (Ibm.com. 2022). In current years banking industry is more into exploring new ways to handle monetary transactions and other baking systems handled easily and quickly which helps to enhance customer services by assuring transparency between the banking staff and customers (De Meijer, 2016). According to (Palihapitiya and Thulya. 2020), Blockchain technology is known as the essential technology which promises an innovative approach and implementation in the banking sector and transforms the sector into more transparent, democratic, efficient, and secure. Within the UK banking sectors, there was a clear and definite demarcation between the banks that provide commercial banking facilities along with monetary transmission services largely to the customers who live in the United Kingdom (Bis.org. 2022). In recent times, the UK banking sector came to know about blockchain technology and understands the requirement of applying these to enhance the service to domestic and international corporate clients with various forms of official regulation and controls. To know more about blockchain technology students can take help from SourceEssay online assignment help experts.
The UK and Blockchain Technology
According to (Yeoh, 2017), In the year 2015, march, The government of the United Kingdom set out its approach to implementing digital cryptocurrencies. According to the analysis (Timothy, and Santra, 2017), a digital cryptocurrency is a form of currency that exists virtually and uses cryptography for securing banking transactions. This also demonstrated the fact that when the UK government decided to use cryptocurrencies they do not have a central regulating authority in such instead of applying a decentralized system for the purpose of recording all the banking transactions and the concerning units. London, United Kingdom has already taken the lead in implementing cryptocurrency, and Blockchain technology in its banking industry with a clear adoption of friendlier regulatory stances than their counterparts in New York. According to an assignment help London experts the UK chancellor makes his announcement about the plan to regulate Digital cryptocurrency and invest more money to bring more opportunities for the banks to enhance their relationship in the future with the change in the country’s n financial areas.
The objective of the Bank of England, UK is to maintain financial and monetary stability with the safest and most trusted form of money to the business, household, and financial system of the country. Central bank digital currency (CBDC) would represent a new form of money in the economy of the country which is also available to the public in a sense of general purpose. Unlike banknotes, central bank digital currency is considered electronic (Bankofengland.co.uk. 2022.). The Bank of England issued Critical bank digital currency to ensure the safest form of digital money transactions available to the general level public.
According to the paper (Coulter, 2022), the Central bank of digital currency under the implementation of digital blockchain technology is associated with Distributed ledger technology. Digital ledger technology can include some potentially useful innovations that are helpful at the time of considering the design of Central bank digital currency. Decentralization can enhance the availability and resilience where the use of smart blockchain technology makes it enables the development of programmable money and assets.
Classification Of The Blockchain System
According to essay rewriter Blockchain technology can be implemented in a country’s banking system depending on their classification and corresponding characteristics.
Public Blockchain technology: Public blockchain technology provides an open platform for individuals belonging to different banking branches in the United Kingdom to transact with decentralized consensus mechanisms.
Private blockchain technology: Private blockchain technology facilitates the exchange of information, data, and other confidential financial sharing among one or two groups of individuals, This kind of blockchain is generally used in the banking sector to ensure a clear exchange of financial data, and information among the banking staff to create hassle-free transaction facilities.
Consortium blockchain technology: Consortium blockchain is another blockchain technology that can also be considered as a private or permission blockchain not with a single institution of people but a whole sector of the banking industry for example has been considered.
Blockchain Transformation In The Banking System
As per the report (Laroiya et al., 2020), Nowadays banking industry in the United Kingdom is facing various issues like increasing rates of interest, increasing costs of operations, and issues like fraudulent attacks on centralized servers. Most of the banking transactions in the country are dependent on manual setup and processing involving various intermediaries and that also become time-consuming. Here blockchain technology help in providing a variety of solutions only after some modern technological implementation and helps in eliminating the increasing cost and time in operations, a secured form of transactions, and others with the facilitated real-time cryptographic transactions. Most of the country’s banks like Royal Bank of Scotland (RBS) & NatWest, Revolut, and Bank of England already started using this technology and increasing their profit by making their transaction even easier, more secure, and fast. In the following, some features and solutions proved by blockchain systems in the banking sectors have been defined one by one.
Banking payments: Payments in baking is the most important thing individuals avail. Both commercial and central banks in the country use this technology for a smoother payment process. Implementation is successful in the case of cross-border payments without any third-party payments. Though as per (Wu, and Liang, 2017), some issues are observed in cryptocurrency for payment and exchange to the local money due to the difference between the exchange rates.
Digital verification: this is another banking area that can be done through the removal of all the traditional verification systems including face checking, identity, and proof of client intention with the use of blockchain. Blockchain provides various ways to choose the user who can measure them and others who share their identity without any repetition in registration for every banking service.
Bookkeeping, auditing: according to (Faccia, et al., 2019), most of the country’s banks depend on paperwork for double-entry bookkeeping transactions after a long nondigitized process. Implementation of digital cryptocurrency helps to make a fast bookkeeping process with transparent record keeping and adequate invoices.
Lending: Banks are providing distinctive kinds of loans to the general public of the country. However, it takes longer to complete the loan procedures. Implementation of blockchain technology in the UK banking system helps to complete the lending process in a superfast and transparent way.
Crowdfunding: Crowdfunding is another outline that has been used to raise funding by involving large numbers of individuals and small money accounts.
KYC(Know your customer): Traditional Know your customer process used by the banking branches takes a lot of time. With the implementation of blockchain technology, this becomes easier with independent verification of every customer of one bank who can access the banking services and eliminate the duplication and reduction of all administrative efforts.
According to the same report (Consultancy.uk. 202), development in the Fintech space and banking industry with a revival amount of $19 billion in venture capital the previous year is touted as a radical transformation to face all the financial services including the payment systems and financial settlements. Distributed ledger technology is one of the most implemented and effective technology under blockchain which has served the country’s banking industry as a backbone of cryptocurrency, bitcoin. Becoming an integral part of the banking system, fintech used to compete with the existing nonfinancial institutions in the country as well with a rapid increase in Fintech, the business model of baking has been changed with appropriate innovative solutions. To know more students can take help from university assignment help experts.
Issues observed in a baking system with the Implementation of Blockchain
According to (Chowdhury et al., 2021), blockchain technology ensures upgradation in banking sector operations where it provides a way for untrusted parties to come and make an agreement without any use of a middleman and in the State of the database. In the earlier section where the implementation of blockchain technology in different banking operations has already been discussed along with some challenges and issues.
90% of the members of the European payment council believe that blockchain technology fundamentally changes the entire system both positively and negatively in the upcoming 5 years the change can be observed more (CB Insights Research. 2022). Where blockchain increases the chance of most banks to compete with nonfinancial institutions that can also cause serious bank loss in their profit margin and market share. Not only the matter of loss but also the matter of risk or fraud, compliance risk regarding data privacy, and risk in higher operational standards with increasing complexity in transaction handling are some of the issues that the banks need to tackle with the more improved technological application. Issues in implementing this technology in banking have also been observed due to certain limitations of the technology. Higher initial cost, unnecessary complexity, issues in network size, limited storage and scalability, cost of transactions, energy and resource consumption, and unavoidable security flaws are some of the limitations where Improvements are required.
Conclusion
After the end of the report, a conclusion can be made. After the evidence, research, and discussion in this report it has been evaluated that blockchain technology is known to be a decentralized digital ledger that does not have enough capacity to achieve the objective of any hacker or scam sites. For the consideration of secury, it’s necessary to adopt this technology with maximum transparency and security. As per the discussion, blockchain technology like cryptocurrency helps in exaggerating the efficiency of the concerning country’s banking sector for which a lot of scopes have been found with unpredictable values. This also provides a way in establishing an easy and quick transaction system that makes banking operations more powerful, fast, and simple. Areas like payments, KYC, lending, smart contracts, crowdfunding, audit, and bookkeeping have been covered under the implementation. There are various issues, and limitations observed in this implementation for which all banks or institutions have not preferably made their decision to impliment this technology. With a proper plan, proof, modifications, and improvements this technology would get the maximum number of implementation by not restricting the service, and operations and no unwanted security crunches. This report gives an overall comprehensive idea of blockchain technology in the UK banking sector and also helps to ensure that this technology has a chance to become the upcoming best invention in the world after the invention of the internet.
Recommendations
Some recommendations can be made depending on the issues and limited version of Blockchain technology in the banking industry.
It has been observed that cryptocurrency in banking is a long way from the complete replacement of Fiat currencies for this banking industry focusing on the use of blockchain technology to improve their B2B payments, lending, and other benefits and transactions not only restricted only to individual B2C payments or lending facilities.
The use of Bitcoin needs to be more secure and hassle-free which helps to get non-fraudulent transactions, payments, and other banking facilities. For avoiding unnecessary disruption in implementation and techniques, an interbank blockchain can keep a track of all its transactions transparently without having a reply on the network custodial series that could be settled directly on the public blockchain. Companies and individuals engaged in the planning and plotting of blockchain technology needs more improvement in applications for which banks can get the facility system with low cost and can get a higher profit margin.
Some future improvements of blockchain technology in the banking sector of the country can also be considered. As per the discussion, blockchain and bitcoin are tough for those who are not able to work with the software or integrated technological development. One future Improvement can also be made where the banking industry is recommended to appoint software or technological experts on their operations or need to provide such suitable training so that the banks can have considerable facilities with the application of this technology.
Making laws for the adoption of blockchain technology in the banking industry is mandatory for the topmost revolution. Storage of data in the corresponding blockchain technology is quite costly for which a solution needs to be measured. Blockchain technology in the banking sector can hope in reducing the price level along with the improvement of the quality service standards in the upcoming future.
Reference
Bis.org. 2022. The recent evolution of the UK banking industry and some implications for financialstability.
Ibm.com. 2022. What is Blockchain Technology? – IBM Blockchain | IBM.
Consultancy.uk. 2022. The benefits and use cases for blockchain technology in banking.
Zheng, Z., Xie, S., Dai, H., Chen, X. and Wang, H., 2017, June. An overview of blockchain technology: Architecture, consensus, and future trends.
De Meijer, C.R., 2016. The UK and Blockchain technology: A balanced approach. Journal of Payments Strategy & Systems, 9(4), pp.220-229.
Palihapitiya, Thulya. 2020. Blockchain in Banking Industry.
Yeoh, P., 2017. Regulatory issues in blockchain technology. Journal of Financial Regulation and Compliance.
Timothy, D.P. and Santra, A.K., 2017, August. A hybrid cryptography algorithm for cloud computing security.
Coulter, K.A., 2022. ‘Stop Creating Private Money!’: Should the Bank of England Introduce a Central Bank Digital Currency to Compete with Cryptocurrency? A Review of the UK Bank of England’s Proposed Retail CBDC. A Review of the UK Bank of England’s Proposed Retail CBDC (April 7, 2022).
Bankofengland.co.uk. 2022. Responses to the Bank of England’s March 2020 Discussion Paper on CBDC. andbook of research on blockchain technology (pp. 213-243). Academic Press.
Chowdhury, M.U., Suchana, K., Alam, S.M.E. and Khan, M.M., 2021. Blockchain application in banking system. Journal of Software Engineering and Applications, 14(7), pp.298-311.
Wu, T. and Liang, X., 2017, August. Exploration and practice of inter-bank application based on blockchain.
Faccia, A., Al Naqbi, M.Y.K. and Lootah, S.A., 2019, August. Integrated cloud financial accounting cycle: how artificial intelligence, Blockchain, and XBRL will change the accounting, fiscal and auditing practices. In Proceedings of the 2019 3rd International Conference on Cloud and Big Data Computing (pp. 31-37).