Mahi Sall, Advisor, Fintech-Bank Partnerships, Payments and Financial Inclusivity
January 25th, 2023
Mahi Sall is the CEO & Founder of FinXpair, a Berlin-based strategic advisory boutique firm focu[...]
Blockchain-Enabled Fintech Solutions and Applications: What you need to know
Guest Post | Oct 11, 2022
Image: Unsplash/Hitesh Choudhary
Blockchain-enabled fintech solutions and applications are becoming increasingly popular among financial institutions and businesses who are integrating the latest technologies to remain competitive by investing in banking software development projects internally, or by partnering with established fintechs. Humanity now prioritizes innovation as consumers and businesses alike are constantly craving for convenience, access and control over their own financial data, and a personalized fintech app experience.
What Are Blockchain-Enabled Fintech Solutions?
To start with, blockchain is a decentralized database technology storing information in the form of digital blocks. The blockchain's designation is self-explanatory because that is actually a chain of blocks that have:
- A cryptographic hash of the previous component (block);
- Timestamp;
- Transaction data.
The decentralized nature of blockchain technology boosts its resistance to any unwanted modifications of data. Here are some of the most popular uses cases of blockchain fintech solutions today:
Example 1: Cryptocurrencies
Cryptos (BTC, LTC, ETH, DOGE, and many others) are digital or virtual tokens that secure their transactions cryptographically and control the creation of new units. Bitcoin (the mentioned BTC), the first and most well-known cryptocurrency, was launched in 2009. Today, thousands of different cryptocurrencies have a total market capitalization of over $1 trillion.
Example 2: Decentralized Finance (DeFi)
Decentralized finance (mostly referred to as DeFi) is a new category of financial applications built on blockchain. DeFi applications are designed to provide financial services typically offered by centralized institutions, such as banks, without intermediaries.
Example 3: Payment Systems
Payment systems are another popular application of blockchain technology. Blockchain-based payment systems can arguably be used to process transactions faster and more securely than traditional payment systems.
Example 4: Supply Chain Finance
Supply chain finance is financing that helps businesses manage their supply chains more efficiently. Blockchain can create a decentralized network of supply chain finance providers, helping businesses get the financing they need more quickly and at lower costs.
Example 5: Insurance and Lending
Insurance is another area where blockchain is being adopted. Blockchain creates decentralized insurance platforms, which can help insurers offer new types of coverage and reduced costs.
Lending is another popular application of blockchain technology. Blockchain can be used to create decentralized lending platforms, which can help borrowers get access to financing more quickly and at lower costs.
Why Is Blockchain Important for Fintech?
Blockchain is important for fintech because it has the potential to revolutionize the financial industry. Blockchain technology lets us create new financial products and services that are more efficient, transparent, and secure than traditional financial products and services.
The 10 Benefits of Financial Blockchain
Blockchain solutions for the finance sector continue to boom (gladly, a positive one). What has it brought us that we now see evolving? Here are 10 facts about blockchain-driven fintech solutions we cannot ignore!
1. Higher Authorities Are Not Needed Anymore
Decentralization is a key feature of blockchain appreciated by many. It means there is no need for central authorities, or so-called intermediaries, to control or manage the network. Everyone can join such a network and become a part of it, avoiding the complexities bureaucracy challenges us with.
2. Improved Transparency and Privacy
In general, transparency is the ability of parties involved in the process to view the information necessary to complete a task. When we talk about financial data, it must be accurate and up-to-date. The involvement of intermediaries, in most cases, leads to slowing down the speed of transactions or even freezing them.
3. Reduced Costs
The use of blockchain for financial purposes can result in considerable cost savings. How? Let's take a look at the example of international payments. When banks are involved in cross-border processing payments, they charge high fees for their services. Blockchain can help reduce or even eliminate these fees by eliminating the need for intermediaries.
4. Increased Efficiency
The main reason blockchain is often called a "disruptive technology" is its ability to improve efficiency in various industries, including finance. One of the most significant wins of using blockchain is that it can speed up transactions significantly. For example, settlement times for securities trades can be reduced from days to minutes.
See: How Big Data and Blockchain are enhancing FinTech
5. Improved Security
Regarding storing and sharing data, security is always a top concern. With blockchain, we can minimize worries about data breaches because the technology is highly secure. Blockchain uses encryption to store data in a distributed database, which makes it virtually impossible for hackers to access it.
6. Tamper-Proof
Another important security feature of blockchain is that it is tamper-proof. Once data is stored on the blockchain, it cannot be changed or deleted. This feature is especially important in the finance industry, where the accuracy and integrity of data are critical.
7. Automated Documentation
In the traditional financial system, documentation is often a manual process that is time-consuming and prone to errors. With blockchain, documentation can be automated using smart contracts. Smart contracts are self-executing contracts that can automatically generate documents, such as invoices, when certain conditions are met.
8. Improved Traceability
Blockchain can also help improve traceability in the finance industry. For example, in the case of fraud, blockchain tracks the movement of funds and identifies the source of the problem.
9. Accelerated KYC/AML Processes
The Know Your Customer (KYC) process is a critical part of compliance for financial institutions. Blockchain can help speed up this process by automating the KYC checks and storing customer data in a secure and tamper-proof way.
10. New Revenue Opportunities
Lastly, blockchain can also help financial institutions generate new revenue streams. For example, banks can use blockchain to launch new products and services, such as cryptocurrency exchanges and digital wallets.
Final Words
The finance industry is under pressure to innovate and stay competitive. A blockchain is a powerful tool to help financial institutions achieve these goals. Adopting blockchain can improve transparency, efficiency, and security while reducing costs and generating new revenue opportunities.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
 |  |  |
Support NCFA by Following us on Twitter!Follow @NCFACanada  |
Related Posts
What You Should Know About Crowdfunding Your Start-up- All-In on DeFi: Why the Days of Centralized Exchanges Are Numbered
- Innovative tech is shaping the future of financial services
- PURSUIT IS A MICRO FUNDING PLATFORM FOR CANADIAN ATHLETES
- A New Bill Proposes to Put US Crypto Exchanges Under a National Framework
- Gary Gensler’s Vision for the Private-Funds Sector: Accountability and Cost Reduction
Leave a Reply