How blockchain is transforming fund servicing

By Vitthal Ramakrishna

Blockchain technology has disrupted several industries, and the financial sector is one of the most affected. Due to the use of blockchain technology, fund services in particular have seen significant changes. It involves managing collective investment schemes such as hedge funds, ETFs and securities funds. In addition, it involves a number of important tasks, including fund administration, fund accounting and transfer agency. Furthermore, inefficiency, lack of transparency and security issues have plagued traditional methods of fund servicing. By developing a decentralized, tamper-proof and transparent ledger that keeps track of all transactions, blockchain technology has addressed these concerns. The use of smart contracts, which are self-executing contracts with the terms of the agreement directly inserted into the code, has also increased the security and efficiency of fund services.

Role of Blockchain Service

The implementation of blockchain technology has brought several benefits to fund servicing, including transparency, security and efficiency, among others. This is how-

Increased transparency

A decentralized, tamper-proof ledger that keeps track of all transactions can be created using blockchain technology. All parties involved, including investors, fund managers and regulators, can now simultaneously access the same information. As a result, fund servicing is now more transparent, something investors had previously expressed serious concerns about.

Improved security

Fondsservice has always been exposed to cyber threats such as hacking, phishing and identity theft. But by generating a decentralized, tamper-proof ledger that is resistant to hackers and other online threats, blockchain technology improves security. In addition, the security of fund services has also been improved through the use of smart contracts, which are self-executing contracts with the terms of the agreement inserted directly into code.

Improved efficiency

Some important tasks that are part of fund servicing require tons of paperwork and slow procedures. By automating various operations, the use of blockchain technology has increased the efficiency of fund servicing. For example, smart contracts can perform transactions automatically, eliminating the need for intermediaries such as transfer agents.

Reduced costs

For financial organizations, the use of blockchain technology can also help cut costs. It can help reduce operating expenses, for example by automating procedures and eliminating the need for paper-based records. Furthermore, smart contracts are an additional cost-saving benefit as there may be less need for third-party intermediaries. In the long term, however, blockchain is predicted to save financial institutions billions of dollars, which can then be passed on to customers in the form of reduced expenses, ultimately improving the consumer experience.

Applications of Blockchain in Fund Servicing

Supply chain

One of the most exciting potentials for blockchain and smart contracts is the digital revolution in supply chain and trade finance. Current supply chains are complicated, slow, dispersed and involve a variety of stakeholders from around the world, most of whom lack mutual trust. By eliminating intermediaries and automating the execution of smart contracts on the blockchain to transfer titles to goods and money, banks will no longer be required to offer products such as letters of credit, and there will be a trusted network that can guarantee the authenticity and origin of the goods delivered .

Compliance

Financial institutions worldwide are responsible for following and reporting on a variety of local regulatory requirements. In this context, Know Your Customer (KYC) is a critical necessity, but the procedure can be very time-consuming and lack the automated customer identification technology and integration required by organizations to perform their work effectively. However, blockchain technology can offer a single digital source for ID data, enabling frictionless document exchange between banks and other entities. Although the confidentiality of the legally required data is protected, this is likely to result in automated account opening, reduced resources and costs.

Insurance

Low customer satisfaction is caused by various issues, including fraudulent claims, manual procedures, fragmented data sources, siloed single-user policies, and legacy warranty models. The ideal application for insurance on the blockchain is to create policies as smart contracts. It can result in automated payments and enables total control, transparency and traceability of each claim. Therefore, by recording the origin and ownership of diamonds, paintings, homes, vehicles and other assets that need to be insured, blockchain technology will also increase risk modeling for the industry, dismantle the current silos and drastically reduce false claims.

Blockchain Technology: The Future of Fund Servicing

Fondsservice has undergone major changes due to blockchain technology, including improvements to efficiency, security and transparency. The use of blockchain technology in fund servicing areas, including supply chain, compliance and insurance, has the potential to further transform the sector. Since blockchain can provide transparent and traceable records of all transactions, it can help create trust between financial organizations and their customers. Additionally, the use of smart contracts can automate the completion of these transactions, speeding up and simplifying the process for users. Furthermore, blockchain is expected to have a significant impact on the financial sector in the future by enabling interoperability across institutions and bringing new levels of security and efficiency. All of these elements can help financial services companies reduce expenses, streamline processes and increase customer satisfaction.

The author is the founder and CEO, POD World

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