As the mobile industry is growing since the last decade, almost every individual has at least one payment application installed on their smartphones. 24 fintech startups became unicorns by 2019 and you can see how the fintech industry is growing year on year. AI, digital transactions, Blockchain, RPA and data are changing the modern phase of the financial industry including banking, insurance sector and investment firms.
Being one of the oldest industries in the entire globe, the Financial industry has made a lot of growth in terms of becoming automated and reaching each individual user. But, companies which are adopting Blockchain in the fintech industries are going to grow at a faster pace. With the internet connections, people are doing their daily transactions, investments, currency exchange, fundings and more via modern-day fintech tools only.
Fintech scope?
With the rapid adaptation of technology in financial markets, a lot of threats also came into the picture. For example, as the number of users grew in the system and transactions increased, the cybersecurity threat became a huge challenge.
The data problem:
With the increasing usage of various fintech platforms, using big data from users has become an issue. Fintech collects a lot of information from customers. Now to use that data in a synchronized way, fintech firms need to take action on analyzing the data and making decisions over it. Plus, securing personal data of users in the system is also a threat to the system.
Technology integrations:
By implementing technology like artificial intelligence in the fintech world, people can get more customized experience from their service providers. Also, when suspicious activity or transaction is detected by the service provider, they would also update customers. And integrating things with Blockchain would make it even more transparent and seamless.
Automation:
With the introduction of RPA 2.0, fintech products can minimize the workloads of the finance sector. Automation can give delight to customers and decrease a lot of user-managed tasks to make things even faster.
Tax reforms:
With the ever-changing and evolving rules from the government, fintech can help organizations focus on their core business rather than dragging them into the complex net of handling taxation reforms and multiple filings.
Why Blockchain + Fintech?
Needless to say, physical money transactions are costly for the banking systems and currency exchange institutions suffer the most from it. So, why should Blockchain make its way to fintech?
As we discussed the scope of the fintech industry for users, adopting Blockchain in fintech would also bring a lot of positive shifts for market growth. Here are some of the benefits of adopting blockchain in the fintech world.
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- KYC process:
Blockchain in KYC process can bring a lot of changes in terms of transparency towards customers identification and record-keeping for the governing bodies. From stock exchange bodies to the banking sector, an automated KYC can stop frauds.
Collecting KYC documents and maintaining it is easy, but anyone can make changes in it without catching a lot of eyeballs from the people within the system. By implementing Blockchain for KYC process, customers or finance employees would not be able to make any changes in the KYC of customers, making sure that nobody gets the negative impact from mischievous attacks.
- Secured payment solutions:
Blockchain can facilitate secure, fast and less costly transactions across borders of the nation via encrypted distributed ledgers. Such ledges provide real-time user verification along with their corresponding bank details and other details.
Bitcoin and Facebook’s Libra are some of the examples of digital global currencies in the market. By placing a smart contract in the systems effectively, international transactions with the help of Blockchain can bring a difference.
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- Record keeping:
Blockchain is a digital ledger, which can store data in the form of Blocks along with secured links and timestamps of every transaction. From general record-keeping for the banking institutions or managing payment processing online, Blockchain can help the fintech world.
As artificial intelligence can help alert the users for unwanted transactions and history, blockchain would help us keep an eye on what wrong or right is happening in the system. For example, if someone in the banking system tries to enter false information in the system via a dummy transaction, that user would get caught by others and the transaction would go null by adding a block in the blockchain as well.
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- Security:
Blockchain is a decentralized technology, any system built on it would not let any attacker penetrate the system from a single entry point. The entire data would be decentralized and can be given a definition that only the authorized people can analyze that. Which gives customers the right to write on Blockchain their transaction history, but stops when they try to manipulate or change the existing data.
As the computational power of the system would be distributed in the system with multiple active users, a single powerful person or even less than the half population of stakeholders would not be able to make any changes in the entire system.
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- Credit score monitoring:
In recent times, lending money from banks has become easy and people are used to getting credit cards from the financial institutions. Though, to get loans for the economically backward population is still not possible. Here, Blockchain-based money lending solutions can come to help.
Powerful defaulters having relationships with government personals go ahead and take advantage of banking loopholes to gain financial benefits. With a distributed ledger, such frauds would become hard to commit.
Read more: Blockchain Use cases
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- Audit and compliance:
As all the transactions would take place in the Blockchain-based application, companies and banks would not end up spending weeks auditing for the previous transaction histories and current in pipeline payments.
From day zero, the transactions would start taking place on a blank paper system, which makes it suitable for scaling the fintech products on a wider scale.
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- Reducing inefficiencies:
Because of lack of automation in the finance sector, many times the consumers suffer from paying high charges of services, a lot of middle-men make their way in the transactions and other misunderstandings rise up. To solve this problem, smart contracts can become a game-changer.
Smart contracts are automated gate-keeping programs, which would automatically grant or deny processes as per the entered details from the stakeholders and generated rules from the developers. If all the rules in the systems are matched with the requirements, the process would take place without everyone’s permissions and approval times.
Overall, Blockchain can become the next big thing in the fintech world when it comes to digital transactions and secured payments. Designing a system with proper architecture and security is a bit tough, though is achievable.
Read our Blockchain: the Conclusion blog to get the final verdict on using Blockchain in the tech industry now!q
Want to build your next fintech application on Blockchain? Connect with us now!
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