Blockchain technology is best known as the tech that powers cryptocurrencies, making it one of the most important recent innovations in finance. This technology has the potential to solve a lot of problems in the financial sector. It is decentralized, secure, transparent and relatively cheap.
Financial institutions like JP Morgan Chase, Goldman Sachs and American multinational investment bank have started implementing this technology.
Blockchain technology has the potential to revolutionize the banking and finance sector. Here are few ways this technology can change the current scenario of the fintech industry:
1) International Payments
Payments are the most basic and popular application of Blockchain. Virtual currencies can be used to transfer payments around the globe. The crypto transactions are borderless, secure and largely anonymous, processed instantly and eliminates any third parties from transactions.
2) Stock Exchange and Share Trading
Buying and selling stocks and shares always involve a lot of third parties, such as brokers and the stock exchange, who go through a cumbersome process.
Automation and decentralization can help to eliminate the need for a third-party regulator and allow for trading to be run on individual computers all over the world.
A centralized database system for the involvement of money in any situation leads to increased chances of fraudulent activities and economic crimes. Hackers exploit the system causing losses related to financial bodies.
Blockchain is distributed, the transaction is stored in the form of a block with a cryptographic mechanism, so cybercrimes and attacks on banking and financial sectors can be eliminated.
4) Lower transaction costs
Transactions done via blockchain cost minimal when compared to traditional money transfers. Instead of any intermediary, trade confirmations are done through smart contracts by peers, which results in faster transactions, less fees.
5) Trade finance
Organizations can improve trade accuracy by reducing a lot of wearisome paperwork and bureaucracy. By eliminating this time-consuming work, blockchain-based trade finance can speed up the settlement process, streamline the entire trading process, while reducing associated risks.
6) Digital identity verification
Blockchain’s distributed ledger technology will let users have greater control over their own identity. It facilities users to conduct transactions all over the world, manage personal data, log into digital services, share data safely with others with one-time validation.
The widespread adoption of this technology can enhance innovation in the field. This will also encourage more organizations to accept its applications.