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How are Blockchain Use Cases Dominating the FinTech Industry?

blockchain technology

Blockchain technology facilitates a more transparent, comprehensive, and secure business network. It also offers shared operating models, highly efficient FinTech processes, lower costs, and new products and services in the FinTech Industry. 

As per the report by Juniper Research, blockchain deployments allow banking entities to save on cross-border settlement transactions of up to $27B by 2030, decreasing prices by more than 11%. 

FinTech organizations discover that Distributed Ledger Technology (DLT) will save billions for banks and FinTech institutions in the upcoming decade. 

Blockchain-based FinTech can be the new phase of the financial sector’s evolution, eliminating the need for a central authority, adding transparency, and improving security. 

Here are a few use cases of blockchain technology in the FinTech or banking industry. Take a look. 

#1. Banking and Lending 

Core banking includes transactions, payments, mortgages, loans, and many more services which rely on legacy execution processes. It requires 1-2 months for anyone to get a mortgage and 2-3 months for SMEs to get a business loan. 

Blockchain technology innovates banking and lending facilities, diminishes counterparty dangers, and reduces the required time for issuance and settlement. It enables,

  • Validated documentation and KYC detail
  • Decreased operational riskiness 
  • Real-time authentication of commercial documentation
  • Simplified credit forecasting
  • Instant updates for user activities 
  • Authorized data on the network
  • Automated coalition formation 
  • Real-time asset management, monitoring, and implementation of regulatory constraints

#2. Insurance

To initiate a claim, individuals need to face complex questionnaires and physical sheets. The cost of record-keeping is also high. An insurer has to authenticate user identities and contract validity. There are also costly intermediaries. The industry is very much full of vulnerable activities. 

The decentralized system offered by blockchain technology transforms insurance procedures. It offers,

  • Decrease administrative costs. 
  • No need for intermediaries. 
  • Fragmented data sources come together with the blockchain. 
  • Automated parameterized contracts to pay in case of certain risk occurrence.
  • With a shared ledger, it is not possible to change the data once added. 
  • Eliminate the concerns regarding double-booking or dealing with various claims from the same accident. 
  • Start ownership with digital certificates that mitigate forging.
  • Reduce premium diversion. 
  • Policy owners and insurers can record and manage physical assets digitally. 
  • Digitize business procedures and claims to process with Smart Contracts while providing an enduring audit trail. 

#3. Global Payments & Remittances 

Intermediaries are responsible for Global payments and remittances. They ask for the tax for their services. It requires 2-7 days of the time frame and charges avg 6.94 percent to send $200 among different countries. It means remittances are decreased by $48B via fees, intermediaries, and financial organizations.  

Blockchain technology is helping to simplify payment and remittance procedures, diminish settlement timings, and dramatically cut costs. It enables, 

  • Quick and safe domestic retail payments, wholesale and security settlement, and cross-border payments. 
  • Automated auditing and regulatory management. 
  • Different payment forms on a blockchain (Tokenized fiat, stable coin, crypto).
  • Real-time gross settlement among central, commercial, and independent banking entities.
  • Digitized KYC and transaction history, lessened fraudulent risks, and real-time authentication.

#4. Capital Markets 

No matter whether the issuers are SMEs, startups, or large-sized organizations, the process of raising funds can be exhausting. Organizations face more strict rules & regulations, longer times to market, instability in the interest rates, and liquidity hazards. 

Especially in evolving markets, they lack precise supervision, proper regulation adhering, and acceptable market infrastructure for issuing, clearing, settlement, and trading operations. Blockchain enables various benefits for different capital market use cases. 

  • It mitigates point-of-failure with decentralized service. 
  • It offers processes and workflows digitization and mitigating fraud risks, human-caused bugs, and inclusive counterparty threats. 
  • It is streamlining capital market procedures, decreasing expenses, and reducing settlement times. 
  • The process of asset tokenization and financial instruments are digitized. It is now more programmable and easier to handle and trade. The broader market access is possible via enhanced connectivity and the potential of particularized ownership. It offers expanded liquidity and mitigates capital costs. 

#5. Trading 

The trading industry remains dependent on paperwork. So it is more vulnerable to security flaws. Each transaction requires 3-4 months to process credits, document verification, and build confidence among investors. 

Blockchain technology is digitizing the whole lifecycle of finance trading with enhanced security and high efficiency. It offers reduced processing time, increased management transparency, decreased funding needs, lower fraud, and counterparty risks. It enables, 

  • Validated digitized documentation
  • KYC detail with real-time authentication of financial documents 
  • Asset digitization for rapid settlement 
  • Highly efficient economic structures via shared networks and automated procedures  

 

#6. Asset Management 

VC firms, private equity organizations, real estate capitals, and niche markets are getting user requests to enhance liability risk management, accept more active structures for decision making and tackle the growing complications of unstable rules & regulations. 

Blockchain technology is effectively simplifying asset management. It enables, 

 

  • Automated capital launching and administration. 
  • Portfolio digitization to access a larger market, fragmentation, and fluidity. 
  • Smooth engagement of stakeholders with digitized services. 
  • Enhanced management and transparency for investors and stakeholders. 
  • Tailored built-in privacy settings for more confidentiality of transactions. 
  • Incentive system to encourage involvement and drop unlawful activities. 
  • Shareholder rights and responsibilities are programmed within digital assets for superior user experience and mitigated human errors.

#7. Regulatory Compliance 

Regulatory compliance turned out to be highly significant in the commerce and finance sector. It is essential to guarantee that banking entities adhere to laws, regulations, and rules in their daily activities. It is pretty challenging for organizations to keep pace with the complexity of regulatory changes, specifically when they work globally.

Blockchain technology enables,

  • Exceptional governing and compliance qualities are scheduled into digital assets. 
  • Simplify processes that digitize data authentication and reporting.
  • Enable regulatory oversight.
  • Mitigate operational conflicts.
  • Remove manual auditing and other activity errors in real-time.  
  • Establishment and implementation of incentive structures to enhance network management. 

Summing Up 

The global FinTech industry is accepting the transformation with pioneering blockchain technology. No one can disregard enhanced transparency and efficiency with streamlined processes and lower costs provided by the P2P decentralized system.  

Believers anticipate blockchain and cryptos to reestablish banks altogether. Others believe that blockchain will complement old-school banking infrastructure, making it highly efficient.

One thing is clear. Blockchain will indeed revolutionize the FinTech industry.

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