Blockchains are typically managed by a peer-to-peer network and used as a publicly distributed ledger, where nodes in the network collectively adhere to a protocol to communicate and validate new blocks. Blockchains eliminate the need for a third-party intermediary by functioning as a distributed database that is shared among the nodes of the network for common business transactions like the secure transfer of items like money, property, contracts, etc. Although blockchain records are not unalterable, blockchains may be considered secure by design and are characterized as a distributed computing system with high Byzantine fault tolerance.
In processes requiring secure document management and non-repudiation of transactions, the adoption of blockchain technology helps insurers/bankers significantly cut costs, become more responsive to customers, and drive more business.
Some of the back-office processes that blockchain technology can significantly improve are:.
Financial and capital markets use the KYC (Know Your Customer) system to identify “bad” customers and minimize money laundering, tax evasion, and terrorism financing. These efforts to prevent bad actors are costing the financial sector billions of dollars. Also, banks are exposed to huge penalties for failure to follow KYC guidelines. Apart from costs KYC can delay transactions and lead to duplication of effort between banks.
1. Eliminating duplication of effort, automating processes, and reducing compliance errors.
2. Enabling distribution of encrypted updates to client information in real-time.
3. Providing historical records of all compliance activities undertaken for each customer.
4. Providing a historical record of all documents pertaining to each customer.
5. Establishing records to be used as evidence to prove to regulators that the bank has complied with all relevant regulations.
6. Enabling identification of entities that attempt to create fraudulent histories.
7. Enabling analysis of data and records to spot criminal activities.
Large sections of the financial industry operate on legacy systems commissioned decades ago. Two examples I’d like to present are:
Trade booking, back office, and other downstream systems often need drastic improvement and sometimes even a complete technology overhaul. These systems are slow, clunky, and, in some cases, not as secure as they should be, especially at larger banks. Developing new replacement software is a huge undertaking for any bank or investment fund, as their systems need to be robust enough to handle millions of data points a day and secure enough to comply with industry regulations.
Even though the number of FinTech startups continues to increase and provide banks and investment firms with brand new, sophisticated technologies, these startups typically tackle the “trendier” side of finance, like market data or predictive trading algorithms, leaving many areas in the finance industry underserved.
Distributed ledger technology enables all parties of a trade transaction to access the same source of information. This, in turn, helps streamline the order-to-settlement process and reduces the amount of extra work required to complete transactions, thus helping in shortening the settlement time and eliminating settlement failures. Blockchain leads to a simplification of reconciliations and transaction reporting.
Banks rely on CRMs to keep their client’s personal details private, not only to protect the clients, but also the reputation of the bank. Banks commonly choose to purchase a subscription to a CRM application like Salesforce or NexJ, but these can be expensive for software that just provides one function, and might not be as customizable and easily integrated with other bank technologies as a bank would like them to be.
Building a proprietary CRM system using Blockchain technology would provide a network that is secure enough with which banks can be assured their client information won’t be exposed.
In addition, it’s easy to set up such a network using JavaScript, the most popular programming language used today. A bank could easily customize its proprietary CRM to fit the needs of its sales traders and clients in order to keep its old clients happy as well as attract new clients.
When the order is placed by a client, the sales traders send the trade details in a term sheet to their traders, who enter the trade into the front office systems and perform risk management. This risk management includes a number of checks and calculations to determine the level of risk involved with the client’s order and whether it’s safe to be placed or if it needs to be hedged. Some of these checks involve determining whether the client has enough money to afford the security.
For example, one member of the team could enter the trade details while another designated member could view those trade details and calculate the risk and Present Value (PV) impact of those new orders. This information could then flow further downstream, into the trade confirmation and allocation systems.
ThirdRayAI is a software that offers out-of-the-box templates and embedded ML models for blockchain-integrated automated document processing which includes text classification, error correction, and re- extraction. ThirdRayAI automates document extraction with the platform’s 100% GUI. The extracted text and images can be tagged, labeled, and formatted for downstream processing.
ThirdRayAI’s intelligent tools allow users to gain document insights and allow periodic management reporting. The software provides multiple configurations for both document ingestion and output destination. Content transformation is another feature of the software as unstructured data can be converted to structured data and the extracted content can be exported to the desired format.
Third Ray uniquely combines AI and Blockchain to provide banks an integrated platform for developing and customizing complete and seamless CRM, Asset Management, and Trading systems to fit the needs of sales traders and clients as well as other downstream back-office systems for exchange and settlement.
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