Fintech Industry: Even after receiving various technological integrations and breakthroughs, the finance domain continues to operate as a centralized structure, with financial institutions and governments at the core.
While it is an age-old custom, financial service users are beginning to question its worth.
This concern has generated a more transparent answer in the form of Blockchain technology.
The Fintech scene, which has emerged as a tech-based revolution in the financial sector, has gained another dimension thanks to technology.
By bringing substantial changes to business structures and operating operations, it has provided immense promise to the fintech industry.
This has caught the interest of both startups and financial application development firms in investigating the demand for blockchain in the fintech industry.
Something we’ll talk about.
Challenges In The Fintech Industry
1. Relying on a single, centralized system
Although fintech solutions provided a perception of ease, actual power remained in the hands of other companies.
The transactions are still only carried out with the approval of higher authorities, and users must wait for confirmation in their favor.
This is the first difficulty that blockchain has overcome in the fintech industry.
2. Lack of reliability
Users have no idea what’s going on on the other side of fintech applications when they perform any action.
This causes a lot of uncertainty and increases concerns about identity theft, which leads to a loss of trust in the system.
With its properties of transparency and immutability, blockchain application development services tackle this fintech challenge.
3. More time-consuming procedures
Another reason fintech requires blockchain is that operations are frequently slowed by the involvement of multiple third parties.
This, in turn, leads to poorer customer satisfaction and increased turbulence in the commercial environment.
4. Increased operating costs
Time is money in the Fintech business.
So, by minimizing reliance on numerous people, making the process public, and shortening the time involved, Blockchain technology has once again proven to be one of the fintech technologies that can slash costs by nearly half.
Ways Blockchain Is Revamping The Fintech Industry
When discussing the impact of blockchain technology on fintech, the best method to examine and comprehend the impact is to concentrate on the major economic sectors.
Let us now turn our attention to the subparts.
● Banking and peer-to-peer (P2P) payments
In most banking settings, there is excessive bureaucracy and indeterminate incompetence, and these concerns are particularly prevalent in the clearing and settlement sectors.
These gaps are produced by the sheer primitive ways of banking.
The participation of hierarchy at numerous levels can be avoided if a decentralized system uses various consensus algorithms for speedier transactions – thus blockchain technology in financial services…
● Trading and trade finance
For confirmation of information, Trade Finance continues to rely on documentation circulated throughout the world, i.e., documents are still posted or faxed.
Purchases of stocks and shares must still go through a time-consuming procedure of brokerage, exchanges, clearing, and settlement.
Settlement normally takes three days, although it might take longer on weekends because each trader must maintain their databases for all transaction-related documents and compare them to each other regularly for greater accuracy.
According to Accenture, the use of blockchain technology in banking clearing and settlement could save the world’s largest investment bank up to $10 billion.
Furthermore, the Australian Securities Exchange has completed a project to move its post-trade clearing and settlement to a blockchain system.
Banks are now fully aware of the genuine advantages of digital currencies in financial services (based on blockchain technology) over traditional currencies, such as cheaper transaction costs, faster transactions, and so on.
This is persuading all of the world’s financial institutions to investigate the prospect of switching to digital currency and blockchain fintech solutions.
Also, the payment system as we know it now is inefficient, necessitating reform.
● Investing in cryptocurrency- Fintech Industry
In the financial industry, crypto lending delivers a new, efficient, and transparent lending mechanism.
Borrowers can keep their crypto assets as collateral for a fiat-based or stable coin loan, while lenders provide them with the assets they need at a pre-determined interest rate.
This also works in the opposite direction. Borrowers have been known to utilize their stable coins or fiat currency as collateral when borrowing crypto assets.
When it comes to the future of blockchain in fintech, the adoption of technology and the application of blockchain in fintech are on the rise.
The blockchain-based fintech industry was worth USD 231.63 million in 2017 and is expected to be worth USD 6700.63 million by 2023, with a CAGR of 75.2 percent over that time.
In addition, according to a PWC survey of financial services and fintech, 77 percent of the financial industry plans to implement blockchain in financial services by the end of 2020.
Furthermore, funding for blockchain-based financial businesses has increased dramatically, with a total investment value exceeding $40 billion in 2017.