The future of finance will be completely transformed by Blockchain 2022
The future of finance is being completely transformed by blockchain
Web 3.0 adoption is expected to accelerate in the post-pandemic economy as a result of changing consumer behavior and the demand for higher system resilience. All eyes are on blockchain technology this year, unlike 2021, when metaverse and NFT first gained attention. Both governments and companies are increasingly dependent on technology to unlock scalability in a cost-effective and data-secure manner and to create secure, decentralized ecosystems for increased user participation and empowerment.
The technology has seen intense investment from leading financial institutions worldwide. The use of blockchain technology is expected to increase at a rate of 46% globally over the next four years, according to industry estimates, with the financial sector driving this growth.
Promote opportunities for growth
Blockchain is essentially a distributed ledger technology that is being embraced for financial and banking solutions that translate into seamless automation, data decentralization and ease of use, which can cut across levels of digital literacy. To combat KYC and ID fraud, share transaction information and facilitate cross-border payments, the banking, finance and insurance (BFSI) sector is rapidly implementing blockchain-based solutions in these critical areas. According to market estimates, the technology could reportedly save banks up to $4 billion annually in operational costs, just from cross-border payments.
For now, technologies like Microsoft’s ION are helping financial businesses, especially fintech startups, to eliminate the costs associated with constructing powerful back-end and front-end systems by creating secure peer-to-peer ecosystems. Instead, the sector can choose to prioritize customer interaction and product innovation, which will open up new markets and customer bases while allowing for higher penetration of current consumer groups.
This is expected to accelerate the rise of businesses and platforms that aim to match Amazon or Flipkart in terms of the quality of customer experiences. Modern retail investors, especially clients who are digital natives, need a tailored portfolio management experience. While profile-based suggestions and updates can be produced using technologies such as AI and ML, blockchain applications such as smart contracts have the potential to revolutionize how investors interact with their investments. To check if their investments match pre-established criteria, investors can log in from their phones and provide the necessary authorization to manage their assets accordingly. Such democratization has the potential to promote both fintech and financial inclusion.
The Indian context
The opportunity is particularly important in a nation like India, where traditional investment preferences are giving way to newer habits as a result of falling interest rates on debt investments, surplus funds as a result of rising incomes and a preference for a balanced debt capital. exposure as a result of ongoing global volatility. Additionally, India’s digital investment industry is expected to grow at a five-year CAGR of 22.4% to reach USD 14.3 billion by 2025, driven by the largest generation, the millennials.
When effectively implemented with other Web 3.0 technologies in this context, the impact of blockchain can produce highly fluid financial investment experiences. These may be attractive to older investors seeking greater control and convenience in a growing investment environment outside fixed deposits (FDs) and recurring deposits, as well as investors from semi-urban areas and urban millennials (RDs).
According to the 2019 Insights Banking and Finance Service landscape studies, organizations that provide banking and financial services were targeted more often. Since the publication of the study, malware has been used more frequently to attack this sector. To protect the crucial information of millions of consumers and their hard-earned money, BFSI needs to upgrade its cyber security system. The highest possible level of data security and transparency are two of the major benefits that blockchain offers in a business environment that is becoming more and more digital first. I believe this is the fundamental aspect of the technology that will drive its acceptance throughout the BFSI sector.
Financial institutions are beginning to see the potential of blockchain after spending huge sums each year to modernize outdated systems or move to sophisticated hybrid cloud systems in their quest for secure operations. Blockchain networks are confidential but not anonymous like bitcoin. This gives organizations total access to transaction information without the risk of compromising user identification or tampering with transaction data.
The success and speed with which governments develop and update legal frameworks for the technology will be a key factor in future blockchain adoption in India. Governments around the world are already recognizing the potential provided by blockchain to change sectors and boost the economy, although we are likely to face some obstacles along the way.
According to estimates, government-related blockchain initiatives in India will generate USD 5.1 billion in GDP by 2032. It is only a matter of time before firms figure out how to use blockchain’s untapped potential to create the next generation of personal finance goods and services. especially in light of initiatives like Digital India which emphasize building a knowledge-led society and economy.
Edited by Prakriti Arora
