In the financial services industry, everyone is talking about one thing – Fintech. And although Fintech attracts attention, not everyone understands what exactly this means. Let’s figure it out.
Fintech is a revolutionary innovation that will impact all financial markets. And the Blockchain will help in this. Fintech is the intersection of financial services and technology. Fintech now means not only technologies that work with the back-end of consumer and commercial financial institutions.
The term also refers to technologies affecting financial services, mobile payments, money transfers, and asset management. Fintech is about technology, but it also affects every other type of business that the financial services industry does.
Every time you interact with financial transactions on the Internet, you are using financial technology or Fintech.
How is Blockchain Related to Finances?
Blockchain is a kind of decentralized ledger of all peer-to-peer transactions. By working with blockchain technology, participants can confirm transactions without the need for a central clearing authority or third-party involvement.
Blockchain is the technology that powers cryptocurrencies. These days there are many trading platforms, one of which is safetrading, that allow users to sell and buy a cryptocurrency and create their own crypto wallets.
From here, it becomes clear that this technology will be fundamentally important for business. Blockchain in the fintech sector will help improve next-generation business processes and reduce the cost of trust in financial transactions.
Blockchain technology can also enable a higher return on investment than most traditional in-house investments. You can read more about the Blockchain in the Forbes article, which explains why users can edit only those parts of the Blockchain that “belong” to them but cannot touch others.
How Blockchain Helps Fintech?
The biggest challenge facing a fintech company is trust. Every financial company needs to prove to its clients that they are reliable. It is necessary to create a system that will ensure a high level of security of financial transactions to have a safe financial product and attract investments. These systems usually cost a lot of money to purchase.
Blockchain technology does not require a lot of costs from a development point of view, and at the same time, it is secure. Since the Blockchain is a series of immutable blocks, it allows companies to track the complete lifecycle of a financial transaction. Blockchain has made it possible to create safe and secure financial products and bring innovation to the financial sector.
Blockchain is entering the fintech market as a revolutionary. Such technology can destroy the possibility of bribery and the complicated, non-transparent process of dealing with financial institutions. And this is an entirely different level of interaction in Fintech.
Why is Blockchain so Reliable?
The answer lies in the very structure of the Blockchain. It is based on decentralization and distribution. Previously, all of our financial transactions were managed by a third party. All data was stored centrally, and these major parties have largely shaped the way the economy works.
And many were worried about whether one of these parties would become corrupt, whether too much power was concentrated in it? On the Blockchain, data is centralized, and there is no single authority. Blockchain potentially eliminates the middleman, returning control to the owner of assets – data or tokens that carry some financial value.
In What Areas can Blockchain Influence Fintech?
1. Digital Payments
Transfers of funds from different countries have often been the subject of complex interactions between banks and high fees. In the end, you often overpay – the amount of the transfer is almost equal to the commission for that transfer. Thanks to the Blockchain, this process is simplified and accelerated. The costs are much lower than in traditional banking institutions.
2. Digital Identity
Identification of a person using the Blockchain is greatly simplified. Users must register their identity on the Blockchain. But it needs to be done only once to interact with other participants. And only if they are also connected to the Blockchain.
3. Smart Contracts
With the help of Blockchain, it became possible to create smart contracts. Such a contract is a kind of computer code running on top of the Blockchain. It contains a set of rules according to which the parties to this smart contract agree to interact.
Is Blockchain – Future of Fintech?
Fintech market participants are undoubtedly happy with blockchain technology. Many people dream of Blockchain becoming the mainstream financial model. Statista writes that global spending on blockchain solutions will grow from 1.5 billion in 2018 to about 15.9 billion by 2023.
However, not all problems have been resolved yet. It will take some time to get the Blockchain working, making it smooth and convenient for everyone in the Fintech sector. Blockchain is a relatively new technology, and business has yet to reveal all its aspects and functions.
Much more research and development will be required in the future to make the best use of Blockchain in our financial transactions. The financial technology market will be expanded with the solution and digital products created with the help of custom software development provided by IT companies like MLSDev.
The potential for using Blockchain technology is genuinely enormous, which means that the Fintech sector has a lot to look forward to. Such a transparent and convenient future of working with financial institutions is too tempting.