As traditional banks and consumers are moving towards hassle-free methods of undertaking financial transactions, an increased number of institutions are beginning to adopt smart technologies like IoT, Blockchain, and Artificial intelligence. While IoT and Artificial intelligence enable the introduction of improved business operations, Blockchain, in particular, also makes the customer experience a smooth ride through a seamless process.
According to reports, around 24% of businesses relating to Fintech make use of blockchain technology to provide customer-centric services. Further, Fintech companies have raised around $450 million in the year 2017 using blockchain technology which has witnessed a 79% increase as compared to funds raised in 2016. About 90% of American and European banks have also started exploring blockchain technology to improve service.
On the customer side, in the year 2019, about 40 million users have installed blockchain wallet through which over 450 million transactions have been recorded as of September 2019. Thus, it can be said that Blockchain has revolutionized the way fintech companies operate.
What You Should Know About The Fintech Industry?
Fintech essentially means financial technology institutes that make use of smart technologies to provide financing services to customers. Unlike traditional banks, where customers have to visit to get their loans sanctioned, customers using Fintech can easily get small business loans in addition to mortgages and business lines of credit.
No matter how bad the credit history is, business organizations can rely on these online financing firms to get easier funding. This also reduces the need for verifying the customer’s background and eliminates the need for a long, drawn-out document process.
Fintech: Projection for 2020 and beyond:
- During the year 2020, the Fintech industry is expected to reach around $4.8 trillion.
- Around 77% of financial services are expected to adopt Blockchain Technology by the end of the year 2020.
Why Fintech’s Need To Adopt A Blockchain Mechanism?
The Fintech industry faces challenges with breach of trust, security, and privacy. In recent years, several hacking issues from ransomware have been recorded by cyber experts. This made it essential for digital banks to have a mechanism that can safely handle financial transactions and prevent these issues. This is where blockchain technology can step in. It is a cost-effective and easily implemented mechanism that can be deployed.
What is Blockchain
Legacy banks work on a centralized database that is vulnerable to cyberattacks. With blockchain, distributed ledgers are stored digitally with each block having a timestamp and link to the last created block (means the last made change to the ledger). In this way, any malpractice or tampering of the block can be easily gauged as the hashtags with which it is secured get distorted. This establishes trust among people across the financial chain. Since it is a chain of immutable blocks, no one can introduce changes or can maintain the process and edit the transaction.
This makes the transactional process more effective, efficient, transparent, and secure for financial operations. Hence, the fintech industry is slowly progressing towards the adoption of blockchain technology to achieve the above objectives.
Applications of Blockchain in Fintech
Here are the few applications of blockchain which are playing a great role in the Financial Industry:
Digital Payment Solutions
It is important these days to have an effective solution that enables faster transactions. As blockchain is a distributed ledger technology it can facilitate fast, secure, and cost-effective transactions across the globe.
The transactions are going to be completely anonymous where encrypted ledgers are used. This provides a real-time user verification mechanism to make the transactions simple and private.
In Blockchain, there is no need to stop with Fiat currencies like USD, Euro, etc. Additionally, virtual currencies like Bitcoin and Altcoins can also be handled here. Startups and industries are also dealing with these currencies for their daily operation.
Elimination of Intermediaries
The primary aim of blockchain technology is to process the transactions instantly without the need for a middleman. In traditional systems, there are intermediaries that verify the transactions to facilitate the payment. This can be a time-consuming and expensive process.
But, in the case of blockchain, there is no such intermediary. Hence, one can easily complete the process without relying on manual processes.
Completely Secure Transactions
Blockchain technology relies upon proof of concept methods. Thus, the blocks are fully secure and private. Moreover, one cannot edit the block since it is completely immutable. The transactions are anonymous without any person or service keeping a track of the same. Hence, there is no chance of hacking or for any fraudulent activities to take place.
A huge set of Data Storage & Handling
While comparing with traditional banking and storage systems, there is no such concept called “unlimited storage”. So, whatever the data may be, there is always a limit of the data when it comes to storing and managing it.
On the other hand, with blockchain, there is no such restriction on the amount of data storage. The distributed ledger can store a huge amount of data without any limit.
Handling is also going to be quite an easier task. Moreover, traditional data can be edited since they are in physical form. This is going to be impossible with blockchain adoption for financial operations.
The major adoption of blockchain technology for business operations is to authenticate, verify, store and manage the electronic records without any hurdles. Major banking sectors use blockchain to verify KYC by collecting details.
This can indeed avoid fraudulent activities from happening in the future.
What can you expect for the future of Fintech with Blockchain Industry? As most of the domains have started to adopt blockchain for their financial operations, the greater synergy of operations is expected in the upcoming years. By the year 2024, Blockchain Tech is set to hit around $20 billion. Other industries like Pharma, Healthcare, Insurance, Security, and small enterprises are also expected to adopt Blockchain to ensure seamless financial operations. This will enable the introduction of fraud-free and cost-effective transactions in the upcoming days without any doubts.