Why Fintech Should Keep Its Faith in Blockchain
Many crypto unicorns have faltered. NFTs, cryptocurrencies, crypto exchanges – these once heralded technologies now appear on the brink of collapse. And with suspicion surrounding crypto, it unfortunately means that blockchain’s reputation is tarnished.
But beyond its use in crypto, blockchain technology holds its value and is proving to be a potential game changer for fintech. Whether for its ability to streamline value chain use cases, reduce costs and settlement times for money transfers, or innovate to ensure inter-organizational document sharing, blockchain is poised to disrupt, innovate and improve fintech.
Blockchain payments
Several sectors that cross fintech, such as banking, insurance, personal finance, payments, lending and wealth management, are all likely to be disrupted by blockchain, where layers of (trusted) intermediaries exist, and core issues of trust between partners cannot be solved with centralized solutions.
For example, remittances have traditionally relied on trusted intermediaries to maintain auditable accounts of interbank and international transactions. These types of transactions can take up to three days to settle and involve five or more intermediaries. In addition, the fees for international transactions and transfers are incredibly high, and it becomes clear that this process is time-consuming, expensive and unnecessarily complex, considering that blockchain technology can remedy these problems.
Amrit Jassal
With blockchain-powered payments, transactions/payments or remittances can be made securely, with much faster processing, and at a lower cost than the conventional methods, regardless of the geographical location of the sender and recipient. Blockchain payments already support several currencies, including the US dollar, and it is clear that by leveraging blockchain technology, costs and settlement times can be drastically reduced.
Secure document sharing
Highly secure document sharing is another area where blockchain technology can innovate, especially in the fintech sector. For organizations such as banks and financial institutions, whether for US Securities and Exchange Commission oversight, compliance with financial industry regulators, or Sarbanes-Oxley reporting, maintaining control over financial data is critical.
The need for irrefutable evidence that the provenance and integrity of their key documents is sound requires financial services companies to place implicit trust in centralized systems and audit processes, bucking the current trend towards the use of decentralized value chains. It also requires a high degree of security measures as well as the involvement of trusted intermediaries at times.
Blockchain document sharing benefits include virtually tamper-proof storage and sharing, complete privacy controls, and security measures that reduce cost and complexity.
Traditional document sharing and verification comes with its own challenges, including overhead costs, data storage considerations, fraud or tampering risks, and privacy concerns among them. Blockchain technology can provide a viable alternative solution for cases where verifiable documents need to be presented across business entities and national borders, such as insurance policies and proof of identity.
However, while choosing a service for this purpose, remember to choose a solution that is flexible enough to leverage different blockchains for future proofing, as this space is rapidly maturing. Blockchain document sharing benefits include virtually tamper-proof storage and sharing, complete privacy controls, and security measures that reduce cost and complexity. These features make blockchain document sharing very valuable to financial institutions and organizations.
Blockchain technology is ready for the fintech moment beyond crypto.
Amrit Jassal is Chief Technology Officer and co-founder of Eligible.
