After the pandemic, the Information & Technology industry and banking & finance sector can speed up working on Web 3.0 because customer habits are changing, and business systems need to be more reliable. For this, everyone is looking at blockchain technology. In 2021-22, the focus was on the metaverse and non-fungible tokens (NFTs).
Governments and businesses that want to create safe, decentralized environments to engage and empower users to rely more and more on technology to unlock scalability in a way that protects data and doesn’t cost too much. Therefore, top financial institutions worldwide have been investing money in it.
By 2024, the blockchain technology business will be worth $150 billion worldwide, according to a report from Statista.
The global blockchain market can grow at a rate of 46% over the next four years, with the financial sector being the first to use it worldwide. Reports on the market say that the innovative technology, blockchain, could save banks billions a year in operational costs related to cross-border payments alone.
How is Blockchain Driving Growth in the Banking & Finance Industry?
FinTech is conscious of how enterprise blockchain technology can improve the end-user experience, generate fresh revenue streams, minimize risk in operational processes, and make financial operations run more smoothly.
The banking, financial services, and insurance (BFSI) industry are moving quickly to use blockchain development services & solutions to protect against KYC and ID frauds, share transaction records, and make cross-border transactions.
Technologies like Microsoft’s ION assist financial organizations and fintech start-ups to eliminate the costs of creating robust back-end and front-end systems by making secure peer-to-peer (P2P) ecosystems.
The chance is significant in India because replacing old methods of investment with newer ones will require more usage of blockchain technology.
In India, blockchain projects run by the government are expected to add USD 5.1 billion to the GDP in 2032.
The Reserve Bank of India wrote an article called “Distributed Ledger Technology, Blockchain, and Central Banks” in February 2020.
In response to the RBI’s plans, public and private banks have started using the benefits of DLT and blockchain by forming partnerships with fintech companies and investing in them.
7 Ways Blockchain Technology Transforms Financial Services & Banking Industry!
Blockchain technology is significantly impacting the banking, finance & fintech industry. Here are some ways blockchain technology transforms financial services to make a difference:
P2P payments have facilitated trade between individuals and companies. Blockchain technology has allowed businesses to process payments for a fraction of what banks charge. Using DLTs helps companies save money by simplifying the real-time tracking process and reducing the overall cost of operations. By creating a decentralized ledger, blockchain technology speeds up payments and fees less than banks.
Giving Banking to People Who Are Unbanked
Around the world, more than 2 billion people, including 100 million in India, do not have bank accounts. Blockchain technology will make it possible for people who can’t open a bank account to do so. People who don’t have bank accounts but do have smartphones could use their smartphones to open a bank account that is run by the blockchain. This technology might make it easier for more people to enter the financial sector.
Juniper Research says that by the end of 2030, banks that use blockchain can save USD 27 billion on cross-border settlement transactions, a cost reduction of more than 11%.
Credit and Loans
In today’s financial system, it takes time to apply for a loan or credit. People often have to put up collateral, give personal information, and sign documents in person. The blockchain will make it possible to process loan applications in hours instead of days. Blockchain ensures that the lending and borrowing process is safe, trustworthy, and efficient. A credit risk assessment will improve if financial data is correct, up-to-date, and transparent.
Blockchain and the Business of Trading
At the moment, paper documents are a big part of the global trading market. When someone buys government bonds, for example, they usually get the bonds themselves. Even though settling a trade can take up to three days, this is still a very long time. The blockchain makes it possible to perform every transaction digitally. Due to the tokenization process, the need for paper documents will reduce. If there were no middlemen, a transaction could be done in a few minutes.
Auditing and Rules
Many blockchain companies are building Regulatory Compliance solutions based on blockchain technology. Every time a transaction is made, the blockchain creates an unchangeable record. It will be much easier to check on what a company is doing. The fact that we can’t change data blockchain makes it less likely that wrong information will leak; thus, ensuring all records are correct. The development of smart contracts and consensus algorithms made it possible for banks and other financial institutions to use blockchain.
Here are some ways that blockchain can be used: Permissioned Cross-Border Payments, Stock Exchange and Share Trading, Trade Finance, Digital Identity Verification, Syndicated Lending, ABA (Accounting, Bookkeeping, and Audit), Credit Reports Management, Hedge Funds, Crowdfunding, Data Management Systems, Asset Management Systems, Capital Market Digitalization, Insurance, and Peer-to-Peer (P2P) Transfers.
Advantages of Blockchain for Business in Finance
Dedicated enterprise blockchain development changes how financial services work for different platforms worldwide. They provide transparency, security, privacy, and trust with multiple companies in various industries while sharing economies. Here are some of the most cutting-edge benefits of blockchain technology for businesses and the web3 ecosystem:
Trust, Transparency, and Privacy: A shared and unchangeable source of truth makes it possible for all parties in a business network to work together, come to agreements, and manage specific data while keeping the integrity and privacy of the information. Its ledger is transparent and we can’t change it, making it easy for people in a business network to work together, share information, and reach agreements.
Security and Data Integrity: Due to its distributed architecture, there is no single point of failure. This means that there is less need for data intermediaries. Fraudsters or other bad people can’t change it, so it’s almost impossible to manipulate or hack. Intelligent contracts make it possible to program business logic. Blockchain technology makes it possible to implement and automate business logic through coding, which verifies each step of a business process with accuracy, security, and step-by-step control.
High Performance: Modern private blockchain platforms handle hundreds of transactions per second and occasional spikes in network activity. Its private and hybrid networks are designed to handle hundreds of transactions per second and frequent peaks in network activity.
Streamlined Processes: More automation improves the overall efficiency of operations. It allows settlement, auditing, and reporting to happen in real-time. This cuts down on processing times, the chance of mistakes and delays, and the number of steps and middlemen needed in traditional processes to get the same confidence level.
In a Nutshell,
Enterprise blockchains with many potentials could change financial services and how fintech works by giving blockchain members more control and lowering the costs of managing infrastructure. Every industry in the world is being transformed by blockchain, but data management and the FinTech industry benefit the most from it. It makes banking systems safe & secure, speeds up transactions, and lowers the cost of processing for banks.
We might think there are fewer standards for blockchain, but this technology is here to stay, and we might see cutting-edge blockchain solutions that let us digitize assets. That’s because of the blockchain’s immutable, decentralized, secure, and distributed nature. It is a great way to cut costs and speed up everything from payments to trading assets to issuing securities, retail banking, clearing, and settlements.
It’s clear that blockchain technology is much more than Bitcoin or other cryptocurrencies, crypto wallet development, etc. and that in the next 10 years, it will change traditional banking at the speed of light years. As interest in blockchain continues to grow, banks are building use cases and looking for ways to streamline their operations with blockchain so they can better serve their customers.
Softobiz Technologies is working hard to improve financial processes with blockchain by making them more efficient, reducing reconciliation, and creating new revenue streams for our customers and across our value chain.