Since the launch of Bitcoin a decade ago, the blockchain has continued to grow in popularity. It has found use cases outside of cryptocurrency. In the fintech industry, technology is making a huge impact. As a result, startups and mainstream companies in the finance world are showing a lot of interest in this technology.
The Benefits of Using Blockchain in the Finance World
Blockchain technology brings several benefits to the finance world. These benefits include:
• Dependability and Trustworthiness
While various fintech solutions offer users convenience, the control of fintech platforms still lies with third parties. As a result, if the third party is not competent or professional, all the promised convenience is just a facade.
Essentially, every user of a fintech solution has to place their trust in them. However, blockchain is helping to eliminate these issues. You do not need to trust the person behind a solution or even know how they operate. As long as their operation is powered by the blockchain, users are guaranteed it will work.
• Increased Speed
• Reduced Operational Cost
One of the major costs of any fintech is time. If a platform can reduce the time it takes between transactions, it can boost profits, which will reduce the cost of operating. Blockchain can help fintech startups achieve that. Besides that, using the blockchain eliminates third parties and the processing fees that they charge. The result is that using blockchain technology could help to cut the costs of a fintech platform by 50% or more.
The Impact of Blockchain on the Fintech Sector
The blockchain has already had a major impact on the fintech world. Here are some of the areas it is bringing change:
• P2P Payments
In the existing banking system, the payment infrastructure is costly and slow. However, using blockchain technology in the clearing and settlements industry could save the investment-banking world billions of dollars. Various firms in the banking sector are already working on solutions that would be powered by the blockchain.
• Providing Banking to the Unbanked
There are currently over 2 billion globally who do not have bank accounts. In short, they are unbanked. Using the blockchain will help people who are unable to open a bank account to open one. While billions of people do not have a bank account, many of them have smartphones. The blockchain exists purely in digital form and people could open a bank account via their mobile phone that is powered by the blockchain. As a result, the blockchain could help to open up the financial world to more people.
• Blockchain and the Trading World
In the current setup, the global trading market still relies on a lot of physical paperwork. For instance, if you purchase government bonds, they are usually in a physical form. Besides that, settling a transaction in the trading world is still exceedingly slow and can take up to three days to complete.
With the use of the blockchain, every transaction could exist in a purely digital form. Through the process of tokenization, there would be no need for any physical paperwork. Third parties could be eliminated and a transaction could be completed in a matter of minutes.
• Credit and Loans
• Regulatory audit and Compliance
The regulatory compliance sector is estimated to be worth around $118 billion globally. Various startups in the blockchain world are coming with regulatory compliance solutions that are powered by blockchain technology. A major benefit of the blockchain is that it creates immutable records of each transaction. Consequently, auditing a company’s operations will be much easier. The immutability of the blockchain also helps to reduce the possibility of erroneous reporting, which ensures the integrity of all records.