Blockchain technology has completely transformed the modus operandi of the fintech industry
By S Anand
Blockchain, in layman’s terms, is a decentralized, transparent, immutable and publicly accessible database where digital information (transaction records) is stored in blocks and is linked by hash function.
Fintech, like any other technology-oriented industry, is moving forward as we speak. New, better approaches to processing and managing payments emerge every day as new Finance apps flood the market.
The FinTech blockchain market is expected to reach a value of $36.04 billion by the end of the year 2028.
Even after being on the receiving end of several technology integrations and advances, the financial domain continues to function as a centralized model – with financial institutions and governments at the center. Despite this being the long-standing norm, users of financial services have begun to question its value.
This doubt has ushered in a more transparent solution – Blockchain development services. Decentralized finance (DeFi), based on blockchain, will be a new financial technology that reduces banks’ control over financial services and money.
Blockchain technology has added a new dimension to the FinTech landscape. It has offered enormous potential to the FinTech industry by bringing significant changes in business models and operational processes.
In the FinTech market, time is money. The involvement of various third parties often delays the processes. This ultimately leads to lower satisfaction and higher turbulence in the business economy. So by cutting down the dependency on multiple people, making the process public for everyone and reducing the time involved, Blockchain technology has proven to be one of the FinTech trends that can reduce costs by almost 50%.
As newcomers, FinTech startups have to work very hard to instill the same level of trust of an incumbent. Blockchain helps build an image of fintechs as stable and reliable because it is highly secure by design. This reliability is essential to woo new customers and earn their loyalty. FinTech developers are ready to design top-level auditing methods by building blockchain-based applications. Regardless of the system’s expansion, the blockchain acts as a repository of linear blocks that add a new record for each subsequent activity. An audit of all transactions can be carried out quickly and securely using the information from this system, which ensures full transparency.
The possibilities it opens up for security: we believe this is where blockchain’s greatest innovation lies. Blockchain’s increased security offers several advantages, one of which is that you can bypass traditional fraud prevention methods that require multiple parties to validate transactions.
Transactions on a blockchain are automatically validated as they are sent to all nodes in the network for authentication. Know-Your-Customer will be a single digital entry and cryptographically secured and distributed across the network as a means of eliminating multiple entries and verification. These improvements in security are set to directly help sectors such as retail banking, wholesale banking, investment banking, payment networks, lending marketplaces, equity crowdfunding, asset managers, brokers and regulators. A Blockchain can log a complete, immutable financial record of every transaction, providing tremendous protection against fraud.
Over the past few years, Blockchain technology in finance has matured. The aforementioned characteristics disrupt traditional business models in the financial industry. Blockchain brings a radical change in the business world with its characteristics of immutability, decentralization, distributed ledger and transparency.
Financial institutions of all sizes should certainly look to integrate and leverage this advanced technology into their business model to create their own benchmarks for increased productivity, cost reduction and customer satisfaction throughout the value chain.
The author is co-founder and CEO, PaySprint
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