Everything You Need to Know
About Web3 Banking

Mike Danilchyk
Founder, CTO of Web3soft Top Blockchain Development company

As we are entering the era of Web3 and Metaverse, we see how many technologies and business models are evolving and changing the way we do usual things.

What does Web3 mean for banks?

The modern banking system is not perfect. Clients pay high fees to banks and don’t always understand exactly where their money goes. At the same time, banks maintain a large staff and apply a not completely reliable system of interbank transfers.

The use of web3 technologies makes it possible to take intermediates out of banking operations and automate many processes. Banks can get additional sources of income due to the emergence of new business models and blockchain-based products. The efficiency of the banking system will also improve by reducing costs.

What are the Pros and Cons of Web3 banking?

Some benefits of web3 services for banks are:

Сheaper and quicker wire transfers

This is particularly relevant for cross-border transfers and micropayments in cases when bank fees are comparable to transfer amounts. Today such transactions take a long time (up to 3-5 working days) and are quite expensive (from 1% of the amount). On a global scale, this is a huge expense.

In cryptocurrency networks, such transfers take several minutes and are significantly cheaper.

Higher transparency

As practice shows, the lack of transparency in the banking sector leads to various abuses by the bank or its individual employees that can lead to serious financial losses and full-scale economic crises.

Distributed web3 technologies can create a system that will be open and reliable simultaneously.

Automation of processes and faster transactions

Blockchain makes it possible to get rid of complex document flow because any operation can be traced. It can cut costs significantly and reduce the number of company’s staff. In this сontext, the technology will be a guarantee of continuity of data and the human factor will be excluded.

It is important to understand that already today there are quite a lot of projects on the blockchain in the field of lending, customer identification and corporate financing.

Single-entry digital identification

Financial operations in the network are impossible without identity verification procedures. Therefore, banks' clients have to constantly use all kinds of passwords and codes.

Blockchain allows to go through the identification procedure only once to create a special identification certificate. In the future, it will be used to confirm any transaction and all personal data will be securely protected. Just think how convenient, reliable and simple is it!

Low-cost data storage and sharing

Traditionally, banks use their own internal data stores that can interact with other bank vault systems only superficially. At the same time, the development and maintenance of such funds requires large expenses.

Web3 technologies make it possible to create a joint storage that will significantly save on costs, ensure the reliability of data and guarantee complete security.

Lower KYC spendings

On average, the costs of financial companies for the KYC procedure amount to $ 48 million, banks — $ 70 million, companies with incomes over $ 10 billion — from $ 150 million. In addition, the KYC procedure takes about 26 days, and users must go through it every time when they are turning to a new financial company for the first time.

Web3 solutions may become the new standard for financial and personal data storing. Banks and financial organizations will be able to create the only one valid certificate for subsequent checks and use this information to speed up the KYC procedure.

Better data security

Companies that provide financial services become victims of cyber attacks 300 times more often than other businesses because it’s the easiest way to get direct access to users' money. As a result, banks are forced to invest huge sums of money in ensuring the security and reliability of their services.

Blockchain based security tools will give more chances to detect and block unauthorized attempts to obtain data. Due to this, banks and insurance companies will be able to minimize overheads associated with data leakage and raise the level of customer confidence in their structures.

Web3 disadvantages and limitations:

Low scalability

Many industry experts mention it and I probably will not be an exception.

To date, many popular distributed ledger systems cannot process a large number of transactions that leads to a slowdown in the turnover and processing of transactions in them.

Storage complexity

Currently, the Bitcoin blockchain requires about 200 GB of disk space. And with time, many blockchain registries may increase significantly. The increases in the block sizes obviously outstrips the increase in the capacity of hard drives, and the network risks losing nodes if the registries become too large for users to download and store.

Off-scale resource and energy intensity are also specific risks of the web3 sector.

Industry conservatism

And this is, perhaps, the main challenge to my mind. For many banks and financial institutions, the issues of
regulation, personal data protection, compatibility with other software and equipment are quite acute and businesses are afraid to implement really functional and cost-effective solutions.

How can Web3soft help?

Web3soft is a trusted development partner with years of experience in blockchain. We know how fast the market moves and want to deliver the highest quality in the market for each and every client.

My team will help you find growth points for your Fintech business and optimize many key tasks.

Contact me and I will show you specific examples how to create unique web3 solutions that will be efficient for YOUR company.

Everything You Need to Know About Web3 Banking

Everything You Need to Know
About Web3 Banking