By S Anand
Blockchain, in a layman’s language, is a decentralised, transparent, immutable and publicly accessible database where digital information (transactional record) is stored in blocks and are paired to each other with hash function.
Fintech, like any other tech-oriented industry, is advancing as we speak. Novel, better approaches to the processing and management of payments come to light each day as new Finance apps flood the market.
The FinTech blockchain market is expected to reach a valuation of $36.04 Billion by the end of the year 2028.
Even after being on the receiving end of multiple technology integrations and advancements, The finance domain continues to operate as a centralised model – with the centre being Financial Institutions and Governments. Despite this being the long standing norm, financial service users have begun doubting its value.
This very doubt has ushered in a more transparent solution – Blockchain development services. Decentralised Finance (DeFi), based on blockchain, will be an emerging financial technology that reduces the control of banks on financial services and money.
Blockchain technology has added another dimension to the FinTech landscape. It has offered tremendous potential to the FinTech industry by bringing significant changes to business models and operating processes.
In the FinTech market, time is money. The involvement of various third parties often delays the processes. This ultimately leads to lower satisfaction rates and higher turbulency in the business economy. So, by cutting down the dependency on multiple people, making the process public to all, and reducing the time involved, Blockchain technology has proved to be one of the FinTech trends that can reduce the cost by nearly 50%.
As newcomers, FinTech startups have to work very hard to instil the same level of an Incumbent’s trust. Blockchain helps build a picture of fintechs as stable and reliable because it is highly secure by design. This trustworthiness is essential to wooing new customers and earning their loyalty. FinTech developers are primed to design top-tier auditing methods by building blockchain-based applications. Irrespective of the system’s expansion, the blockchain acts as a repository of linear blocks that adds a new record for each subsequent activity. An audit of all transactions may be completed quickly and securely using the information provided by this system, assuring complete transparency.
The possibilities that it opens up in terms of security: we believe this is where blockchain’s biggest innovation lies. Blockchain’s heightened security offers multiple advantages, one of which is that you can bypass traditional fraud prevention methods which require multiple parties to validate transactions.
Transactions on a blockchain are automatically validated as they are sent to all the nodes in the network for authentication. Know-your-customer will take place as a single digital entry and cryptographically secured and distributed across the network as a means of eliminating multiple entries and verification. These improvements in the field of security are set to directly aid sectors like retail banking, wholesale banking, investment banking, payment networks, lending marketplaces, equity crowdfunding, asset managers, broker-dealers and regulators alike. A Blockchain can log a complete, unchangeable financial record of every transaction, offering huge protection from fraud.
Over the last few years, Blockchain technology in finance has matured. The aforementioned characteristics disrupt traditional business models in the financial industry. Blockchain is bringing a radical change in the world of business with its characteristics of immutability, decentralisation, distributed ledger, and transparency.
Financial institutions of all sizes should most certainly look to integrate and leverage this advanced technology into their business model to create their own benchmarks of increased productivity, cost reduction, and customer delight across the value chain.
The author is co-founder and CEO, PaySprint