blockchain in financial Services
Blockchain is no longer a new term. There are trillions of people on this planet quickly adopting this technology.
Yet numerous questions arise! What is it that makes blockchain such an important matter to be adopted? How is this technology disrupting every sector one at a time?
Why is it important that we get accustomed to it? There are a billion answers. We have jotted down the most crucial ones here.
Blockchain in fintech
Blockchain In Fintech is the talk of the town. The banks transacting trillions every day around the world, look for ways that curb any kind of unlawful acts or even hurdles in maintaining records.
When this is the case, imagine a scenario that does not require any bank’s involvement to maintain records or levy transaction charges despite the heavy movement! This is the impact of blockchain in financial services.
\”The main event isn\’t bitcoin. It\’s using the blockchain to disrupt other industries and Wall Street.\”Patrick M. Byrne
This blog is meant to keep you well informed about the use of blockchain in fintech
What is blockchain in terms of fintech?
Blockchain was discovered in an attempt to create centralized digital currencies. Fortunate for us, they ended up discovering cryptocurrencies and blockchain.
Blockchain is a decentralized distributed ledger that stores infinite information in the form of cryptographic codes. These codes are the backbone of blockchain, in the sense that the ones that let the chain function in a certain way that it is meant to. Applied Blockchain Other Than Financial Applications?
Applied Blockchain Other Than Financial Applications?
Insurance
Blockchain can be implemented in insurance companies to avoid manual verifying of crucial documents
Banking
Banking sectors can use blockchain to verify the documents and confirm the genuineness of the sender and the receiver.
Loans
It can also be used to grant loans with blockchain-verified certificates, that have higher credibility.
Transactions
Cross-border transactions will no longer take hours to reach the recipient. It will now happen in an instant.
Tracking
When it comes to e-commerce, blockchain will play a major role in tracking, sending and receiving products.
Supply Chain
In yet another huge industry like the supply chain, blockchain-based tracking will play a crucial role.
Corporate
Enterprise blockchain apps will enable corporate sectors to monitor their employees with much ease and freedom.
What are the major differences that make blockchain-based transactions stand apart from other regular ones?
| Traditional Currencies | Cryptocurrencies | |
|---|---|---|
| What is it? | A regular fiat currency that we use in everyday life. | Currencies developed with cryptographic methodology. |
| Instances | Two systems. One is fiat and the other commodity. | Two systems. One is virtual and the other is crypto. |
| Bank Verifications | Transaction code as an intimation from the bank. | Unique digital signature generated by an algorithm |
| Path of the transfer | Monitored by a centralized, trusted third party. | Monitored by public ledgers in the blockchain. |
| Transaction cost | Heavy transaction cost depending on the bank. | Overall minimal transaction cost universally. |
| Volatility | Fluctuates according to economic conditions | Fluctuates based on supply of coins and demands. |
| Transaction Time | Reaches the recipient after hours of transferring. | Reaches the recipient in not more than a minute. |
| Security | Centralized. Vulnerable to one point failure. | Decentralized. No chances of one point failure. |
What Are The Benefits Of Blockchain In Fintech?
This is the biggest irony that the world has to face now. The whole of the blockchain was predominantly created for financial solutions. Now, we are here, discussing how it would benefit the financial industry.
“As the value goes up, heads start to swivel and skeptics begin to soften. Starting a new currency is easy, anyone can do it. The trick is getting people to accept it because it is their use that gives the “money” value.” – Adam B. Levine, the founder of Let’s Talk Bitcoin, CEO at Tokenly.
Quick Settlements
With blockchain in the fintech sector, the transactions and settlements can be completed successfully in no time. Direct transactions of money without any intermediaries in the decentralized network promotes rapid settlements. Blockchain fintech solutions avoid intermediaries and bankers in the transaction process; hence, even the cross-border transactions become swift. Some of the leading bank service providers explore the ways between banks to reduce the processing time of transactions with blockchain tech.
Capital Optimisation
The decentralized blockchain network avoids intermediaries, third-parties in the transaction, and promotes direct P2P model in financial sectors. Reducing the workforce in the fintech industry can optimize the capital funds required to kick-start the business. The decentralized banking system can reduce the capital funds for individual sectors by sharing the total costs.
Reduced Fraudulent Activities
Instant transfers of funds reduce the risk of fraudulent activities in blockchain fintech applications. Devoiding of intermediary processes and centralized servers become boon to consumers and a ban to hackers.
Enhanced Contracts
If blockchain in fintech is at pace, then smart contracts come into force. Automated smart contract protocols avoid disputes and fraudulent interventions in bank agreements, transactions, settlements, and claims processing. The predefined conditions mentioned in the smart contracts are immutable; hence the entire financial system becomes hassle-free.
Intense Transparency
The decentralized blockchain fintech applications provide immense transparency among the financial institutions under a single roof. With a predefined consensus mechanism, financial organizations can transparently perform operations.
Extensive Support At The Time Of Crises
The countries can perform cross-border transactions rapidly with blockchain in fintech solutions. At the time of natural calamities or environmental crises, bulk processing of funds within countries can be processed with no time in a decentralized financial network. Integrated blockchain network of banking, insurance can enhance the processing of claims with smart contract protocols.
Ergonomic And Error-Free Reconciliation
In blockchain fintech applications, the transactions are verified and then added as a data block by the community peers. Moreover, the blockchain network is immutable; hence the added data transactions can not be modified by any members. As the transactions are verified and approved in real-time, the reconciliation of transactions, report generation becomes error-free and easier.
Significant use cases of blockchain in fintech
? The most significant use case of blockchain implementation in fintech is the reduction of transaction costs. The international transaction takes up around 20% of the transaction charges, and the transfer of federal currencies adds up to the cost besides. In the blockchain fintech network, the transaction cost is very minimal and almost negotiable. Cross-border transactions become rapid and secure with crypto payment gateways.
? Another benefit of blockchain fintech application is the transparency and consensus mechanism of transactions among the fintech organizations. Adding on the hassle-free smart contracts in financial organizations, lighten up for the dispute free deals and processes.
Renaissance that blockchain showers on the fintech sector
? Blockchain fintech applications can process the transactions in a secure, transparent, and appropriate manner efficiently with no processing time. The Fintech industry can leverage the blockchain technology by implementing crypto payments, automated smart contracts, decentralized data storage, and management.
? Non-financial brands such as Google, Amazon, Apple are trying to render streamlined financial services with blockchain technology. Devoid of central governance in blockchain, fintech solutions promote the shattering of banking regulations and renders efficient community services.
Future of blockchain in financial sector
? The fusing of blockchain and fintech applications will resolve all the user experience disputes in the sector. Payment transactions will be faster, secure, and cheaper with negotiable transaction costs.
? Blockchain fintech applications would open the doors of transparency, decentralization, immutable, cheaper, tamper-proof transactions. The decentralized financial system could reduce operational costs and enhance the profitability of organizations. The decentralized financial system is not far from humanity with blockchain technology!
Final Thoughts
\”Blockchain is the tech. Bitcoin is merely the first mainstream manifestation of its potential.”— Marc Kenigsberg, founder of Bitcoin Chaser.
In less than a decade cryptocurrencies will become mainstream and fiat will no longer be valued. The wisest move would be to adapt ourselves to this new technology before our rivals, do.
If you are at an early stage of adaption and require abundant knowledge about the right investments, never hesitate to walk into our office. Our doors are wide open and you are welcome anytime.
Key Takeaways
- Banks and other concerns in the finance industry are ransacking ways to simplify their processes.
- Knowing blockchain has got all that they want to declutter things, most companies have started research and tests with this technology.
- This technology can be used to grant loans with blockchain-verified certificates, that have higher credibility.
- Cross-border transactions will no longer take hours to reach the recipient. It will now happen in an instant.
- Smart contracts will play a crucial role in performing contract-based transactions.
- The hard-earned certificates will no longer be valuable if it is not blockchain verified.