Blockchain technology is a decentralised and distributed public ledger that is utilized for recording transactions within a network of computers. Blockchain is secure, transparent, and nearly impossible to alter due to its design and security. Ushering in blockchain in financial services would enable transacting with the confidence that the transaction is secure and reliable.
Even in its infant stages, blockchain technology has demonstrated its ability to revolutionise various industries. The characteristics of decentralization, transparency, and immutability are appealing to business sectors all over the world, but finance is leading the way in terms of implementation. Here are some examples of how businesses are leveraging the power of blockchain in financial services.
List of Applications of Blockchain in Financial Services:-
A blockchain provides a complete chronological record of all transactions. The manner of integrating blockchain in financial services is that the ledger is distributed throughout the network in multiple copies. When a new transaction or block is added to the network, everyone on the network receives a copy. The ledger is not controlled by a single entity, and the system is designed to provide everyone with the same information.
Because everyone on the network has a copy, it’s nearly impossible to change or delete transactions or add data that hasn’t been verified. To be successful, a coordinated attack on hundreds – or even hundreds of thousands – of computers at the same time would be required, which is highly unlikely. These features have a plethora of obvious advantages for the banking and finance industry, and fintech companies could incorporate this aspect of their organization in their marketing strategy in a major way. This could definitely be an addition to the best fintech marketing strategies.
2. Transfer of Funds
Consumers and financial institutions face numerous problems and challenges when transferring money to other countries. Every year, crores of rupees are sent internationally, and the process is typically costly, time-consuming, and full of errors. While there are many UPI platforms that provide swift and secure services, they definitely leave room for improvement.
The use of blockchain in financial services has the potential to change all of that. Many major banks have adopted blockchain technology for international payments, which saves time and money. Customers can also use blockchain in financial services like money transfers to complete electronic transfers with mobile devices, thereby circumventing the time-consuming process of visiting a money transfer facility, waiting in line, and paying the transaction fees.
3. Mercantile Benefits
- Reduced fees: The majority of funds transferred in the world are through financial institutions such as banks or credit card processing centres. Each of these steps adds a layer of complexity, as well as fees that can add up quickly. When customers pay with a credit card, merchants must pay processing fees, which reduce their profit. By streamlining the transfer process, blockchain payments reduce or eliminate fees.
- Insufficient funds will be eliminated: Consumers occasionally pay for goods or services with a bad cheque, resulting in a loss and additional fees for merchants, as well as the possibility of a legal hassle to recover losses. Blockchain-based payments can provide merchants with the assurance that the transaction will be completed within a few seconds or minutes.
- Cryptocurrency: Digital currencies are the latest wave of blockchain-based assets. Blockchain companies are lowering the entry barrier and providing a seamless exchange of the most popular cryptocurrencies as a banking alternative to tedious bank transfers which don’t always offer a convenient way of doing business.
4. Individual Benefits
- Fewer scams: Many people are concerned about online scams, but blockchain-based payments are quick and reversible. They are also less expensive than using banking services, particularly for expensive items.
- Less time and money: Cash, wire transfers, and cashier’s cheques are said to be the safest payment methods, but cash is untraceable, wire transfers are time-consuming, and cashier’s cheques can be forged. All of these issues are eliminated with blockchain-based payments, resulting in greater trust.
- Financial Inclusion: Because of blockchain’s low costs, start-ups can compete with major banks, promoting financial inclusion. Many people are looking for alternatives to banks due to constraints such as minimum balance requirements, limited access, and banking fees. Blockchain can provide an alternative to traditional banking by utilising digital identification and mobile devices.
In addition to the benefits listed above for both individuals and merchants, banks also stand to gain immensely from the use of blockchain in the banking financial industry. In addition to acquiring a NACH mandate and an ECS mandate, blockchain is set to become the next big security mandate.
5. Recording of Data
Money transfers aren’t the only way blockchain in financial services can change the industry. A blockchain is a fantastic tool for tracking transactions and ensuring accurate, secure data.
A distributed ledger is nearly impossible to alter, making ownership easier to track. Transfers of ownership and liens can use the ledger to validate the information, increasing trust. Transactions can be expensive, complex, and time-consuming, but blockchain in financial services allows for complete automation that can eliminate time, money, and effort spent on data storage and verification. Smart contracts can keep track of when a buyer pays and when the seller delivers, as well as address any issues that arise during the transaction. Automated systems also reduce human error and operate 24 hours a day, seven days a week.
6. Reduced Instances of Fraud and Data Breach
Blockchain records information in a ledger, with each block containing transaction information as well as a unique hash that refers to the previous block. Every person on the network also receives a copy of the transactions. Because of these characteristics, blockchain technology is resistant to distributed denial-of-service attacks, hackers, and other forms of fraud.
Without the threat of cyber-attacks, the cost of doing business is reduced, thereby saving money and stress for all parties involved.
A Look Ahead
Despite the fact that banking is subject to a slew of rules and regulations, an increasing number of financial institutions are recognising the potential of blockchain technology and cryptocurrencies. We will see more blockchain-based solutions for transparent, accessible, and reliable financial transactions in the near future. The major players in these industries have already started to conduct tests to discover the innovative uses and opportunities that blockchain provides.
You now have a solid idea of the many applications of blockchain in financial services. It all depends on how successfully you can integrate it into your current marketing initiatives. Depending on your organization, you may require a complete overhaul or simply a few minor changes to your marketing strategy.