QANplatform Use Case Story: Banking and Finance
Blockchain has grown beyond Bitcoin into a force that can revolutionize business processes and fuel more growth in world economies. Among several industries, the banking and finance sector has largely benefited and seen innovative changes from the solutions offered by blockchain technology.
Read on to learn about the impact of blockchain technology in banking and finance and why building quantum-resistant solutions is essential to future-proof blockchain-based financial services.
The Banking Industry in a Nutshell
The banking sector plays an important role in securing the financial stability of individuals, businesses, and institutions.
The core business of the banking industry is borrowing and lending. However, the multi-trillion dollar financial services banking industry also offers a wide range of products and services, ranging from trading and investing to mortgages and global payments.
The market capitalization of the global banking sector hit $7.5 trillion in Q3 2022, highlighting the sheer size of one of the largest and most crucial industries in the world. Banks are also among the largest companies in the world. JP Morgan Chase, for example, has a market capitalization of over $392 billion, while Bank of America has a market cap of over $210 billion.
While there is a range of different types of banks and financial services providers, the two largest banking institutions are central banks and wholesale banks.
Central banks manage a country’s monetary policy using interest rate policies and managing the money supply. Wholesale banks are large publicly traded banking institutions that provide anything from deposits and personal loans to investment management services and corporate advisory.
Mobile banking providers, remittance companies, and digital payments companies are examples of other financial services companies that most people regularly interact with.
How Blockchain is Disrupting Banking and Finance
Despite its size and importance, the banking sector struggles to play catch up with new technologies, resulting in slow paperwork-heavy processes, high overheads, and inefficiencies across the board.
Blockchain can address many of the challenges faced by the banking industry by providing an infrastructure that can improve efficiencies, increase transparency and auditability, and reduce costs.
The blockchain is essentially a distributed database that can securely record, store, and transfer data. In banking and finance, the potential for this technology is very high as it can be applied to so many areas within the industry.
Let’s take a look at how blockchain can disrupt or is already disrupting sectors within the financial services industry.
KYC & Compliance:
Onboarding new customers to a financial institution is not an easy feat for compliance teams, and regulations covering KYC/AML are very strict. Through the use of blockchain, the process can be made easier and more efficient, and information should be securely shared with verified parties. Blockchain-based solutions can provide enhanced security and transparency, helping to prevent fraud in areas such as credit scoring and insurance.
Cross-Border Payments:
The traditional banking system is crowded with intermediaries who have to sign and confirm transactions before they are processed. This makes banking extremely slow, especially when cross-border payments are involved.
Traditionally, it takes more than 24 hours before a cross-border payment is settled. This can cause all manner of havoc, especially in emergency situations. However, via the use of peer-to-peer networking, blockchains enable transactions to be settled in real-time. For example, via blockchain, you can make cross-border payments in less than 5 minutes for a tiny fee when compared to traditional systems like SWIFT.
Programmable Payments:
Blockchain technology enables financial services companies to make programmable payments through the use of smart contracts. For example, when a bank needs to make multiple payouts to customers, the process could be automated using a simple what-if smart contract and a digital version of the country’s national currency.
Borrowing & Lending:
For years, intermediaries have facilitated the process of lending and borrowing between individuals. For example, banks receive deposits from customers and in turn, use this cash to facilitate loans and other lending services to borrowers. However, via the use of smart contracts, blockchain can improve the trust level between individuals by automating the execution of agreement terms almost instantly and at a low cost.
DeFi protocols like Aave, Maker, and Compound are leading the way, and it won’t be long before banking customers are able to tap into DeFi earning opportunities.
Securities Trading & Settlement:
The capital markets are another popular target for blockchain entrepreneurs who believe that the entire security trading and settlement process can be made more efficient, transparent, and secure using blockchain.
CBDC (Central Bank Digital Currency):
CBDC stands for Central Bank Digital Currency. It is a digital version of a country’s fiat currency that is issued and regulated by its central bank. CBDC is designed to function as a legal tender and can be used for everyday transactions just like physical currency.
CBDC is different from cryptocurrencies such as Bitcoin, as it is not decentralized and is fully backed by the central bank. CBDC can be issued and controlled by the central bank, and its value is tied to the underlying fiat currency.
The primary aim of CBDC is to provide an alternative to physical currency and improve the efficiency and security of payment systems. It can also enable the central bank to have better control over the money supply, monitor and mitigate systemic risks, and enhance financial inclusion.
Currently, several central banks worldwide are exploring the possibility of issuing CBDC, and some countries have already begun testing and implementing CBDC in their economies.
Blockchain Use Cases In Banking and Finance
Let’s take a look at a handful of companies that are successfully deploying blockchain in the banking sector.
Paxos:
Paxos is a regulated blockchain infrastructure that offers a bunch of financial services, including crypto brokerage, stablecoin as a service, asset custody, securities settlement, and commodities settlement. Paxos is bridging the gap between traditional finance and crypto finance as a regulated financial institution.
Circle:
Circle uses the blockchain to provide treasury and payment infrastructure services for businesses across the world. It created USDC, a digital dollar used for cross-border payments, trading, and settlements.
China’s digital yuan:
China is one of the first countries in the world to develop and test its own Central Bank Digital Currency (CBDC), the digital yuan. Chinese social media platform WeChat has already incorporated the digital yuan in its payment app to boost the CBDC’s popularity.
Building Banking and Finance Solutions on QANplatform
While blockchains of today are still battling with challenges, such as scalability, security, and quantum resistance, the third-generation blockchain, QANplatform, addresses these issues.
QANplatform is a layer 1 hybrid blockchain that allows developers to build quantum-resistant consumer goods blockchain protocols.
QANplatform aims to close these gaps through its innovative features and capacities that allow for amazing banking and finance solutions to be built on its blockchain.
QANplatform takes a multi-language smart contracts development approach that opens its blockchain for up to 20 million programmers, allowing developers to build solutions in widely used Linux Kernel compatible languages like JavaScript, TypeScript, Java, C, C++, etc.
After building a solution, QANplatform’s Rapid cloud platform deploymentenables users to launch QAN private blockchains in less than five minutes on top cloud platforms like Amazon AWS. This proves that QANplatform is the fastest blockchain to deploy on the market. The platform also plans on boosting its adoption rate through additional integrations to DevOps technologies (Docker, Kubernetes), Indexing and Oracle APIs (Chainlink, Band Protocol), and other major cloud platforms (Microsoft Azure, Google Cloud Platform).
Another exciting feature of QANplatform is found in its consensus mechanism. QANplatform utilizes a unique consensus mechanism, Proof of Randomness (PoR), which lowers the barrier of entry in being a validator in the network. As a result, anyone with a mobile phone or Raspberry Pi can validate transactions in the network, making QANplatform one of the greenest blockchains in the market. This enables banking and finance solutions to utilize blockchains while staying eco-friendly and decentralized.
Additionally, banking and finance solutions built on QANplatform will be resistant to future attacks when quantum computing comes around as its unique Lattice-based post-quantum cryptographic algorithm implemented in Go programming language will secure the platform from quantum computer attacks.
What’s more, developers who use QANplatform to build banking and finance solutions are will be rewarded after each new smart contract deployment and MainNet transactions when their code is reused by other developers.
With these amazing features, QANplatform stands as one of the best blockchains to build solutions that will take the banking and finance industry to another level.
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About QANplatform:
QANplatform is the quantum-resistant Layer 1 hybrid blockchain platform that will allow developers and enterprises to build quantum-resistant: smart contract, DApp, DeFi, DAO, token, CBDC, NFT, Metaverse, and Web3 solutions on top of the QAN blockchain platform in any programming language. In February 2023, Alpine Esports, a Group Renault brand, and inter alia in the Formula 1® Esports Series signed QANplatform as its Official Blockchain Partner to create practical use cases.
