INDUSTRY WATCH abilities , strong risk management and the rapport they have with existing customers . DeFi also generated some of the strongest feelings from surveyors .
According to FIS ’ Global Innovation Report , some 50 % of financial services firms in Australia believe DeFi represents a major growth opportunity for their organization .
A Closer Look at Web3 Opportunities for Banks
Web3 and DeFi are closely intertwined and with the right strategy , banks can drive innovations by leveraging both . Even banks that aren ’ t as technologically advanced can quickly realize some benefits .
A Blockchain is used to authenticate users , validate transactions and maintain an unaltered record of digital information . This method helps to bolster identity and transaction authentication across a broad range of financial services . The advantages of Blockchain include streamlining banking and lending services , reducing fraud in payments and decreasing issuance and settlement times in trading .
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Accelerating the settlement process : The finance industry has struggled to keep pace with the 24 / 7 world . While real-time transactions have become commonplace , many payments can still take days to settle . With Web3 , settlement can happen instantaneously for both domestic payments and foreign currency remittances , leading to reduced transaction and settlement fees . Efficient , precise credit reporting : Web3 enables immutable credit histories to be built quickly through Blockchain . While this is an advantage for banks , it is particularly beneficial for the customers whose financial well-being is often hindered by a lack of credit history . Blockchain can serve as a gateway to automate the credit lending and borrowing process , and overall reduce costs for lenders and borrowers alike . y Enhanced compliance at lower costs :
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Blockchains can facilitate compliance through its transparency and immutability offerings . Documents that must be disclosed to regulators are always available on the Blockchain , streamlining and automating compliance to a level that was previously impossible . Liquidity management : Complexity presents a ubiquitous challenge within the banking sector , especially when it comes to liquid management . All liquidity managers are tasked with analyzing and managing a multitude of accounts in real time to assess risk and manage liquidity . Through the implementation of distributed ledgers , banks can acquire a comprehensive view of all bank accounts to manage intraday liquidity with precision . This real-time understanding of funding requirements empowers banks to minimize liquidity exposure and liquidity buffer requirements . Distributed ledgers also facilitate real-time settlement , which improves efficiency and allows money market transactions to be completed with greater certainty . New bond issuance : Blockchain has become a gamechanger for banks to issue bonds . Traditionally , new bonds entailed tedious paperwork , with long settlement delays and post-issuance ambiguities . The use of smart contracts revolutionized bond issuance by eliminating manual processes and effecting sameday settlement . Furthermore , Blockchain technology democratises bond issuance , making it more accessible and affordable for smaller companies . In Singapore , DBS Bank launched its first security token offering by issuing a digital bond , offering an innovative and efficient way to raise capital in APAC . Digital assets : These assets play a crucial role in the DeFi world . Blockchain technology enables the creation of a multitude of digital assets , such as fungible cryptocurrencies , stablecoins and non-fungible tokens ( NFTs ). We are already seeing Australian banks such as NAB and ANZ take the leap into stablecoin development , both looking to create a digital representation of a bank deposit to allow corporate customers to use Australian dollars for Blockchain-based transactions .
As shown by the above examples , Web3 is set to revolutionize the banking ecosystem in due course , bringing forward significant innovations that will reshape the nature of finance . With Web3 built on the base of collaborative technologies , banks , fintechs and the regulators that work together can benefit in the long run . p
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