Introduction
Blockchain technology has become a critical aspect of the banking sector as the technology is being adopted. Blockchain has been critical in helping optimize payment systems and improve credit risk management (Zhu et al., 2020). Such measures mean the operations become efficient as the technology enters the Chinese banks. Some resources have covered the banking issue in China and how blockchain has been critical in improving the industry in China. This section will focus on analyzing the materials and assessing the information in the materials.
How blockchain improves operation efficiencies of the banks
Blockchain has been among the most innovative ideas introduced in the banking sector over the last fifteen years (Chen, et al., 2021). Technology has been helping in reshaping the banking systems. One of the areas that technology has been helping in improving is the rebuilding and upgrading of payment systems. Blockchain technology helps commercial banks by passing the People’s Bank of China which usually has a complicated process (Chen, et al., 2021). The payment settlements of commercial banks in China have to go through the People’s Bank of China, which makes the process longer and more expensive for commercial banks. With the introduction of blockchain, commercial banks will transact faster and have reduced operations costs since there will be no additional charges. Blockchain technology means real-time transactions make the banking system more efficient. The blockchain helps enhance privacy in the internet of things, which means better communication between the different banking parties. When there is enhanced communication, it becomes easier for commercial banks to be communicating in real-time and transact well. Therefore, introducing blockchain will be a critical advancement in the financial sector in China.
Fraud detection
With blockchain, there are limited parties that have access to the data. Therefore, the data is adequately controlled (Cai et al., 2021). Data is shared in real-time; only authorized parties can move funds. Therefore, it becomes easier to detect any form of malicious activity. Suspicious behavior can be spotted early when blockchain technology is being used. There are adequate security measures by blockchain technology, which also helps trace how transactions are being done. Therefore, it becomes easier for the authorities to detect fraud since every activity is well monitored.
Transparency
Blockchain technology prides itself on traceable and unchangeable transactions (Sharma et al., 2020). Therefore, different parties can be sure that the other parties will not change any transactions or reverse the funds. Such measures help in instilling transparency within the system. Every party that has access to the network sees the same information at the same time. Thus, the commercial banks in China that transact with customers see the same information as the customers. Therefore, the customer’s confidence is built since the system is transparent and the banks do not control it.
Money laundering and counterfeit
Blockchain technology usually leaves a permanent trail that an individual cannot erase. Therefore, in such a system, it is easy to know what transactions have occurred over time (Cai et al., 2021). The source of any money can be traced back since every transaction is done online, and only people allowed to access the system can transact. Therefore, the Chinese banking system can benefit from such a system since it can track all transactions. The movement of any money can be traced within a short time. Therefore, the security measure can even deter money laundering or counterfeiting since the actual money can be easily traced.
Research gap
The different researches do not detail how the Chinese government will likely adopt blockchain technology and how the technology will be adopted into the existing systems. The research will seek to understand how the positive aspects of blockchain can be integrated into the system. Further, the research will seek to understand how the negative aspect can be managed and help the Chinese government cope with the situation.
References
Cai, L., Sun, Y., Zheng, Z., Xiao, J., & Qiu, W. (2021). Blockchain in china. Communications of the ACM, 64(11), 88-93.
Chen, J., Chen, S., Liu, Q., & Shen, M. I. (2021). Applying blockchain technology to reshape the service models of supply chain finance for SMEs in China. The Singapore Economic Review, 1-18.
Sharma, A., Bahl, S., Bagha, A. K., Javaid, M., Shukla, D. K., & Haleem, A. (2020). Blockchain technology and its applications to combat COVID-19 pandemic. Research on Biomedical Engineering, 1-8.
Zhu, S., Song, M., Lim, M. K., Wang, J., & Zhao, J. (2020). The development of energy blockchain and its implications for China’s energy sector. Resources Policy, 66, 101595.
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