Can Blockchain contribute to a safer cyberspace for financial services sector?

The dire need to safeguard businesses and data continues to be on a rise as concerns around cyber-safety loom with the advancement of technology.

by Harsh Mehta

The banking, financial services and insurance (BFSI) industry is highly data-driven and is rapidly evolving on the technological and digital fronts. There has been extensive research on the use of AI, robotics and data science for improvising customer service and operations.The blockchain technology has proved to be a boon for the BFSI sector in boosting cybersecurity and overall operational efficiency.

With tremendous progress made in the field of technology and data science, there are increasing instances of cybercriminal activities that often lead to heavy financial losses for businesses and jeopardise cyber-security. However, there has been a lot of progress made in terms of developing a better and stronger cyber safety infrastructure for businesses, especially the financial services sector, to combat such cybercriminal activities. Blockchain is on the list of contributors to such an infrastructure. Gone are the days when blockchain is just about Bitcoin and cryptocurrencies.

What is Blockchain Technology All About?
According to the definition given by TechTerms, “A blockchain is a digital record of transactions. The name comes from its structure, in which individual records, called blocks, are linked together in single list, called a chain. Blockchains are used for recording transactions made with cryptocurrencies and have many other applications”. Essentially, they are widely distributed networks that can be accessed by millions of users who can add information to the blockchain, where the data is securely encrypted.

Making the right moves
The Blockchain technology contributes to safeguarding the financial services businesses from the risks of crypto-jacking, hacking and cyber-crime.

1. Distributed Network for Enhanced Security
According to a report by Microsoft, “The distributed architecture of a permissioned blockchain is an advantage that can deter or minimise the effect of cyber attacks.” As blockchain does not have a single point of failure, a distributed network helps the financial services business to attain operational resilience.

2. High-End Encryption to Avoid Data Theft
The blockchain acts as a digital ledger, where the information is added by users and is secured through high-end cryptographic encryption. This safeguards the confidentiality of data and prevents hackers from misusing or stealing data for committing financial frauds.

3. Enhanced Transparency for Data storage
The blockchain technology offers users better transparency with respect to data safety and storage. Blockchains are very difficult to manipulate and exploit due to the fact that they have a decentralised data storage system, thus increasing reliability and mitigating cyber-attack risk.

4. Multiple Layers of Security
Blockchains have multiple layers of security and encryptions in place to protect user data. This can prove very useful for secure cross-border transactions and cryptocurrency banking.

The use of permissioned blockchain technology in the financial services sector looks quite promising, is gaining good traction in terms of enhancing cyber security and overall business efficiency. With evolving technology, the blockchain has brought with it a wide range of applications to assist the financial services businesses in attaining a good level of cyber-security and operational efficiency.

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