The popularity curve of blockchain is scaling impressive heights with each passing day. The fintech sector is noticing.
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‘Disruptive’
The word comes pretty handily in describing the immense prowess held by blockchain technology.
The popularity curve of blockchain is scaling impressive heights with each passing day. Various industries and sectors, traditional and new, are looking forward to solutions offered by the blockchain. And why? The successful association of blockchain with cryptocurrencies demonstrates its effectiveness. Owing to this we can already see established industries like real estate, telecom, insurance, and many others experimenting with blockchain technology.
So it is obvious that blockchain is seen as a key part of the fintech industry - an industry that is focused on redefining everything about the financial services through modern-day technologies. While AI solutions are truly a game-changer for the fintech industry, it is the blockchain solutions that empower the industry to indulge in a deeper abyss of data.
Let’s check out why blockchain is eye-candy for the fintech industry:
Use of Blockchain in Fintech
So what set of virtues does blockchain bring to the table?
- Decentralized and distributed
Blockchain is a decentralized ledger. This means that there is no central authority supervising the ledger. But instead, Blockchain is a distributed network where each connected member has the same power.
- Transparent
The data shared on the blockchain network is visible to everyone. Usually, the data is about the transactions occurring on the network. Also, anyone can access the data whenever they like.
- Immutable
Blockchain is an immutable public ledger. It is protected by sophisticated cryptographic algorithms. This means that the data stored in the blockchain network can not be altered. This makes blockchain an extremely safe network to operate.
- Peer-to-Peer connectivity
Blockchain does not require a transaction to go through a central authority. The members of the blockchain can freely approach each other to transact. This makes blockchain an extremely swift network in nature.
- Smart Contracts
Smart contracts are mathematically coded self-executing contracts that get executed themselves as soon as the necessary requirements are met. These facilitate quick and simple transactions as the user does not have to worry about giving a command and following up on the status of the transaction.
Fintech specialists have come up with a multitude of blockchain solutions by picking and maximizing these traits. The fintech industry is full of startups and companies that offer varying degrees of blockchain solutions and make the existing systems much simpler, quicker, and secure.
This brings us to the next part of our discussion.
Fintech Applications of blockchain technology
Indeed the creative and enthralling solutions cultivated by fintech professionals are a treat to witness. While some of them maximise blockchain’s effectiveness as a payment medium, some have built their products on the secure network offered.
Let’s check out such 5 exciting fintech applications of blockchain tech:
#1 Secure payment structures
The first sector where blockchain can have a significant impact is as a medium of payment. The cryptocurrencies reflect the ease and security with which payments can be made via a blockchain ledger.
Also, the payments are conducted way faster since the transaction does not require any approval by a central authority. This also presents a network for institutions to connect with each other and carry out transactions and share data amongst themselves.
#2 Cost effective cross-border transactions
If you have sent money from 1 country to another, then you know how expensive and time-consuming the process can become. This turns out a menace for financial institutions relying heavily on global transfers and transactions.
Blockchain with its public and global ledger can easily and quickly facilitate money transfer. This nearly saves billions each year, and the money is transferred via safe and secure channels.
However, this calls out for a suitable consensus algorithm to be a part of the blockchain.
#3 Paperless financial services
Despite every sector and industry going online, usage of papers still finds its way in regular activities. This goes beyond saying that gigantic millions of papers are spent every year to facilitate data storage and keeping. And let’s not forget the unsettling impact of such a high demand for papers on the environment.
Blockchain provides an efficient alternative to add and store data easily. Since the data present is transparent and can be accessed as per will, the blockchain can have a resounding impact on the usage of papers. Every institution whether financial or not can look up to blockchain for data storage.
#4 Identity management and verification
According to a Thomson Reuters Survey, financial institutions spend nearly $60 — $500 million annually to manage to Know your Customer (KYC) and customer verification processes. However, empowered by the blockchain technology, the KYC procedure is done by a single company and can be shared with every other institution on the network. This will not only save millions of dollars every year but save the company from the hassles of KYC procedures.
Also, identity management is a task of paramount importance, that requires the database to be highly secured. Blockchain empowered by cryptography presents optimal solutions here as well.
#5 Financial services
Blockchain presents an optimum platform for financial institutions to connect with their customers. While the current online infrastructure is surely an exhilarating system, blockchain can make the system much simpler and hassle less. If you are seeking a credit or an insurance policy then the providers can check your data in the connected system and transfer you the required resources. All this occurs at a relatively faster pace than the way activities are conducted in the internet realm.
What to expect in the future?
The future of this association of fintech and blockchain is mutually beneficial to both the fields. Fintech gets a chance to create the best products with blockchain as the underlying technology. On the flip side blockchain gets a chance to be a part of the mainstream industry, and what better than the financial services itself.
The technology, though disruptive, saw slow adoption due to its association with cryptocurrencies. However, now it has a fair chance to grow and bring its disruption to other traditional sectors as well.
The journey of fintech and blockchain has just started. And what remains to speculate now is which marvelous product will the pair produce next!
Exciting times ahead!
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5 Exciting Fintech Applications of Blockchain Tech was originally published in The Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.
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