Smart contracts for banking transactions

Smart contracts are based on the famous blockchain technology. A decentralized blockchain that has multiple advantages. It is a technology that can be used for any field, it does not have an exclusive one. This fact is one of the reasons that causes its expansion to be greater. Thus, smart contracts have positioned themselves as one of the best options for banking transactions. Don’t know why? We explain it to you.

3 reasons why smart contracts shield interbank processes

The purpose of using smart contract technology is to optimize business processes, regardless of the company’s sector. They can be used to carry out processes such as sending remittances, even paying transactions to other people in another part of the world. We can also find three reasons that clarify the usefulness of these smart contracts for interbank processes, and they are the following:

  1. They allow for automatic adjustment

Smart contracts automatically update functions as required. If specific conditions have been negotiated, all parties involved agree and no aspect is changed, the action is carried out automatically.

  • Continuous process monitoring

An exhaustive process of the process being carried out is carried out. It is possible to know in which moment or phase of the procedure you are. At the same time, all movements are recorded, which allows their later visualization. They are securely stored in the block chain.

  • Enable full control of information

In addition, they not only allow full control of all process information, but also absolute confidentiality. Everything is stored and controlled, but it is also confidential, which generates greater confidence in users and even increases the prestige of smart contracts.

Functionalities of smart contracts

Smart contracts are increasingly being developed in the business sector, especially in the financial world. Banks are starting to opt for conducting business transactions using a blockchain, as is the case with one of the most popular banks at the national level, Banco Santander.

The bank’s president, Ana Botín, stated last summer that the Santander Group completed a first transaction thanks to blockchain technology. The smart contract that took place was formed by this banking entity and Nordea Banck AB, from Sweden.

Apart from serving banks, smart contracts are also used to perform actions of other kinds. Some examples are:

  • Will writing: Smart contracts make it possible to automatically draft as well as modify wills. This type of document that is developed is called a “digital will”. The inheritance of the deceased person is divided by means of an intelligent and digital process, and without the need to have a signature of a person acting as a representative to validate the process.
  • Changing the ownership of the assets: Smart contracts allow the change of ownership in a simple and fast way. The change of ownership is carried out in a matter of seconds, it is an immediate process. Only the signature of the person is needed to validate the procedure, no further requirements are requested, which saves a great deal of time.
  • Contract any type of insurance: By using blockchain technology, the insurance contracting process can be accelerated. This technology is used in any type of insurance: home, health, or automobile. The identity of the person contracting the insurance is verified more quickly, their data is recorded, and all this is stored with absolute confidentiality, in which there is no room for the possibility of any manipulation.
  • To carry out buying and selling actions: Those actions are monitored through smart contracts. In other words, blockchain technology monitors and controls the buying and selling actions that take place between the seller and the buyer. Apart from that it also confirms that the products or services of that exchange that has taken place has reached the buying party. How do they check this? Thanks to the existence of different computer programs.

These are just some of the functionalities that smart contracts allow, but there are more. The ones we have just explained are the main and most common ones. However, being aware of the ones listed here is a great step to begin to understand the world of smart contracts.

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