“ The fusion of Fintech with blockchain is the most talked-about technological blend, which has given an exciting push to the supremacy of the fintech industry. Let’s have a deep insight about how the Fintech industry is revolutionized with the help of blockchain. ”
In this current century, technological advancements are rapidly coming into being and dominating the world. Artificial intelligence is likely to take us into an unrecognizable generation of unexpected innovations and social upheaval. The most optimistic blend of Fintech and blockchain has enhanced the security features in financial sectors and customer due diligence through reduced costs and efficient yet accurate transaction rates.
According to Accenture, banks could save the biggest investment upto $10 billion by adopting blockchain technology for the enhancement of financial sectors. Moreover, Jeff Koyen of 360 blockchain predicted that by the end of 2024, the blockchain market will pace up upto $7 million which will accelerate the Fintech industry.
Technology experts are always in search of innovative methods to pace up the traditional resources that come under Fintech’s territory. Merge of Fintech and blockchain has revolutionized Consumer to Business (C2B) and vice versa. There is no way of choosing either Fintech or blockchain. Both are opposite sides of the same coin which are complimenting each other. Fintech Blockchain duo has accessibility towards startups pioneering innovations in financial sectors.
How Fintech Is Revolutionizing Using Blockchain Technology?
Since the digital world is evolving briskly with every passing day, digital payments and e-wallets are becoming the new normal. Challenges faced by Fintech technology in financial sectors are resolved through the power of blockchain. An amalgamation of Blockchain and Fintech industry has played a crucial role in reducing data integrity, Intermediaries, asset creation, reduced costs and distribution along with providing data authentication and user identification for data security.
In order for a block to be added to the blockchain, following are the things that must happen:
- Occurance of transaction
- Verification of transaction
- Storage of transaction into a block
- Then that block is given a unique identity number called hash
According to a survey conducted by PWC, in the upcoming years about 77% of the financial institutions will pace up the world using blockchain. Hence,there is a need for startups, financial sectors, and banking systems to accelerate their game by integrating themselves with blockchain, which is highly-beneficial for the ever-evolving market of banking ecosystems.
1. The Banking Industry’s Globalization
Blockchain has the greatest impact on the big banks around the globe. Some of the well-known names in the global banking sectors are betting big on blockchain to keep them relevant in Fintech competition. A variety of Fintech startups are evolving rapidly that offers accurate and efficient solutions to combat the pain points of traditional banking systems.
TransferWise is one such company which offers peer to peer (P2P) payment software that pairs transfer requests across different countries in real time, which allow the official transactions to remain in a single country, avoiding the inconvenience of traditional cross border payments.
Blockchain is changing the financial industry around the planet for the betterment of the world. 75 plus banks around the globe have aimed to improve their efficiency and accuracy in interbank transfers so far by acquiring blockchain technology. Some big well-known banking sectors such as Credit Suisse, UBS, Barcleys, have adopted blockchain to solve some major problems. Also, a merge of blockchain and fintech has improved the data collection and reporting related to the European Union’s market in Financial Instruments Directive II.
2. Digital Identity
Cyber attacks and online fraudulent scams are evidently rising in parallel with the technological advancements. The issue of misusing someone’s identity for illegal transactions has taken over the headlines and generated a lot of fuss in transaction flow.This problem emphasizes the fact that financial sectors should make it mandatory to verify the identity of their customers using upgraded identity verification services.
Digital identity systems offered by blockchain play a crucial role to fight a battle against fraudsters and deceivers. The customer has to go through the validation process only once. After that, using a blockchain based identity system, transactions can be conducted globally using verified identity documents.
With the help of blockchain, a client can:
- Efficiently manage personal identity data and reputation
- Share their information without any security concerns
- Log in the online financial services without entering password
- Provide digital signatures on any document such as transactions cheques and claims.
For instance, wide-range of organizations are integrating themselves with digital identity management products addressing the needs of their clients and enterprises.
3. Simplification Of Remittance Process
Simplification of the data entry process is the main propaganda of blockchain remittance companies. The idea is to provide accurate, efficient, frictionless and instant financial transactions. Unlike traditional services which go through numerous arbitrators and require manual work, a blockchain network is not a tedious process of approving transactions. Hence major problems faced by the remittance industry are solved by utilizing blockchain technology into financial sectors. Those problems may include high transaction fee and time-taking transaction processes.
According to the prediction of The World Bank, remittances tend to become the largest source of external financing for the potential growth of developing countries. The United Nations has set a 2030 Sustainable Development Goals’ aim to decrease the transaction costs of immigrant remittances to below 3% from their current estimation i.e. 7.1%.
4. Eliminating Dark Tactics Of Stock Market
Fintech startups are rapidly exploring the new vocation called Wealthtech. Blockchain technology is the key to reduce inefficiencies and inaccuracies through automation. Adoption of blockchain technology in the Fintech industry is cost effective, lowering entry barriers and increasing the market base. This will also help in eliminating high fees charges, time-taking processes, stock tempering, naked short selling and commissions of intermediaries.
5. Enhanced Security Across The Board
The main feature of blockchain is to protect user’s data. This aligns perfectly with Fintech companies to make it reliable for customers. Blockchain Fintech softwares disseminate the information stored within them and keep them in the seperate storage space. Robust security algorithms are integrated with enhanced identity verification solutions and cryptography to deter fraud, adding multiple layers of security features for transparent trust between customer and financial sector.
Moreover, Blockchain Fintech duo fights a great battle against data breakings, illicit money transfers and other fraudulent activities to take place. This empowers Fintech businesses to create such systems that share unaltered data through completely decentralized networks.
6. Cost-Effective Transactions
According to the McKinsey study, remittance companies are making up to $40 billion per year by charging high transaction fees. Unfortunately, the situation didn’t change enough from the past couple of years at least from the last half decade, yet financial regulatory authorities are allowing their banks to use their own money.
Blockchain system consists of blocks and every block possesses data, however new blocks never temper with old blocks no matter how vast the system gets. Fintech blockchain applications have decreased the high charges during financial transactions. This enables peer to peer transactions that eliminates all the unnecessary costs.
7. High-End Auditing and Regulations
The need for regulatory services would not be eliminated by placing blockchain into the centre of the economy. Organizations are rushing in a race to provide the accurate and efficient auditing of transactions to their customers in order to provide trustworthy relationships between customer and business.
Thanks to the blockchain technology that has enabled Fintech developers to create upgraded auditing protocols. Blockchain technology is based on a long chain of blocks, each block holding a piece of data, but the plus point is that old blocks are never modified with the addition of new blocks.
8. KYC Verification
Blockchain technology is widely used in financial sectors to provide the ever-evolving services of KYC, also to create Know Your Customer (KYC) utility for the National Stock Exchange. Startups such as Elemential Labs and Primechain Technologies are among the key players using blockchain Fintech duo.
Comprehensive KYC verification process is done to eliminate identity risk using 2 factor authentication, document verification and address verification with high rate of accuracy and efficiency. AML and KYC compliance is adopted by numerous organizations to deter fraudulent activities and illicit money transfer.
Conclusion
Choosing between Blockchain and Fintech is not a question, one is complementary to each other. Enhanced features of blockchain is certainly changing the dimensions of the ever-evolving Fintech industry. Businesses are pushed beyond boundaries by unlocking the potentials of the Fintech industry with the help of blockchain the way blockchain has reshaped the Fintech industry, there is no stepping back. Swift money transactions with minimum fees, enhanced security features, financial tracking, resource management, all this is possible because of the fusion of Fintech and blockchain. Hence, the blend of Fintech and blockchain has surely a bright future ahead.
