Blockchain aficionados are always tinkering with this technology to develop new use cases and apps to address numerous and complicated challenges in the finance sector. Among the applications supporting blockchain in FinTech that are already popular among FinTech, business executives are listed below:
List of Applications of Blockchain in FinTech
1. KYC verification
There is a growing usage of blockchain technologies in the banking industry to build an identity-verification utility for the stock market. Start-ups in India have already employed blockchain in fintech to improve the efficacy and speed of the KYC process. Blockchain and its partner networks can perform fast and accurate Identity Document Verification anywhere in the world.
With the use of blockchain in fintech, you may check your individual, corporate and institutional clients for criminal or banned actions in real-time using global sanctions and watchlists, politically exposed individuals, and unfavourable media databases. Blockchain technology in finance may be used to analyze a crypto wallet’s previous transactions, which can be compared to recognized risk indicators.
2. Managing and financing the supply chain
A single source of authority on critical supply chain points including creditworthiness, supplier inventory levels, purchase order receipt and approval, invoice receipt and approval allows for much faster settlement turnaround times at reduced costs. You can learn more about strategies dealing with the supply chain in e-commerce here.
The autonomous vehicle phenomenon is an excellent way to compare blockchain technology’s revolutionary impact. As long as you compare the cost of driving one person in an autonomous auto to driving that person in a cab, you’ll miss the implications of a driverless vehicle revolution completely. Not only can a driverless car save time and money by eliminating the need for the driver, but it also gives passengers more freedom. In the future, urban planning will be impacted by an open, on-demand transportation option.
Although it may seem like a distant future, we will soon see business models based on usage rather than ownership. The autonomous automobile is seen by some as a time and stress saver, but it is also viewed as a revolution that will affect car ownership, transportation firms, car manufacturers as well as city planners.
3. Simplification of remittances
The immutability of transactions and a distributed ledger architecture are important criteria for eliminating the need for a trust enforcer in the ecosystem, which is provided by blockchain technology. Trust is not a problem in an environment where data is tamper-proof. Counterparties can work together with confidence, knowing that they are always working from the same version of reality.
Blockchain firms are trying to simplify the entire process of remittances by removing unneeded intermediaries. A seamless and near-instant payment system is the goal for many fintech and e-commerce companies, as efficiency is one of the prime reasons to work on refining your operations strategy. Due to the lack of intermediaries and manual effort required for transactions, blockchain networks are more efficient than traditional services. Blockchain in fintech may be able to alleviate some of the industry’s biggest challenges, such as high fees and long transaction times, by reducing transaction times.
4. Trusted payments solutions
Cryptosystems and distributed ledger technology promise to make international payment processing and other transactions more efficient and safer without the need for middlemen such as correspondent banks or clearinghouses, thanks to blockchain technology. Fintech companies need not worry about overhead and ancillary costs borne out of employing and managing a plethora of individuals. Blockchain platforms can single-handedly perform the collective duties of administrating and managing client interactions, transactions, interface, and grievance redressal.
The cryptocurrency of Bitcoin introduced blockchain technology, which is currently being investigated for a broad range of non-Bitcoin uses. Some of the biggest corporate giants in India have started issuing Commercial Papers (CP) while partnering with banks, and CP issuance and redemption have been made more efficient, transparent, and safe thanks to blockchain technology.
5. Keeping records and managing records
It’s possible to change and copy papers, both in physical and digital form. While there are numerous options for secure document management, they tend to be expensive and need the involvement of a third-party vendor. A closed-loop tracking system in Bitcoin protects papers from being altered or tampered with. Because of blockchain technology, market players will be much more transparent. All market players have real-time access to a public record of activities in the ecosystem when using blockchain technologies.
This technology streamlines the entire process while bringing transparency to the equation. So, the turnaround time and complexity of the invoice processing verification method are also sped up as a result of this technology.
6. Regulated digital process that is secure
The immutability of blockchain lends itself well to the use of proof-of-process for compliance purposes. It is possible to utilize the blockchain to keep track of the processes required by legislation. Recording activities and their outputs in a blockchain would provide regulators with a trail of evidence that could be used to check compliance with regulations.
Transactions and ownership of assets are recorded in an immutable way on the blockchain since they first appear in a transaction on that ledger. Multiple asset types benefit from this since it minimizes risk and the requirement for mitigation activities. To reduce the occurrence of theft and fraud of high-value assets and intellectual property, this capacity will be used in conjunction with other security measures. For goods whose provenance dictates value, it will help by leaving a digital trace on the blockchain.
Many start-ups now offer blockchain in FinTech and AI-based digital trust solutions that seek to streamline and safeguard digital regulatory procedures, and they have an edge over the other competitors in the market.
7. Stirring the digital insurance industry
Using smart contracts to streamline claims processing, blockchain technology allows policyholders and insurers to digitally track and manage tangible assets while providing a permanent audit trail. Insurers, both large and small, are experimenting with blockchain technology to avoid insurance fraud, monitor medical data digitally, and more.
Distributed Ledger Technologies (DLT) is fundamentally an open network designed for P2P or B2B censor-free interaction. To find out more about different business models such as the ones mentioned above, check out this article. The peer can be an enterprise or an individual. Using a network-enabled technology requires financial institutions to consider the whole ecosystem and value chain. When it comes to banking, most financial organizations end up conceptualizing from the perspective of what the bank stands to gain from the notion. They need to consider all of the stakeholders in the ecosystem before making decisions.
8. Eliminate the stock market’s dark tactics
Indian fintech firms specialising in wealth tech, which is a relatively young field. By automating processes, blockchain may eliminate inefficiencies, which in turn lowers entry barriers and expands the market. Also, stock tampering, processing time and costs, naked short selling as well as commissions of all middlemen will be eliminated as a result of the use of blockchain in fintech and this change in legislation.
The investor base of India is the new youth and they place a lot more faith in systems that enable transparent handovers of shares, currency, and ledgers rather than hiring financial advisers and consulting a hundred different firms for a single transaction. Blockchain technology has instilled faith in many as regards its endless potential.
9. Calculation of credit scores
Blockchain is frequently used by fintech businesses to provide services to the unbanked population without a CIBIL score and assist them to acquire credit. An earlier pilot project was launched by the Telangana government, which would use blockchain in fintech to provide credit ratings for people from economically disadvantaged backgrounds.
This would enable fintech companies to assess the risk factors involved for every client that comes to them. The ultimate goal is to form a data network of credit scores to eliminate risk factors from the system and facilitate a smooth-running economy of cryptocurrency. Further, this helps with identifying the target groups that can be enrolled into the system, and who can benefit from it. Blockchain will be a revolutionary technology for even those who do not have the means to invest initially.
10. Faster processing of information
Using a distributed ledger, all participants in a financial transaction may be linked together in real time for quicker payment processing. A cash machine at another bank, for example, would have to check with yours to see if you have enough money in the account before distributing cash. Using the same blockchain ledger, both banks may instantaneously disburse payments without waiting for permission.
Several traditional paper-based processes require third-party mediation. Through the use of blockchain technology, transactions may be conducted more quickly and effectively. Documentation and transaction information may be maintained on the blockchain, removing the need for paper exchange. No need to reconcile numerous ledgers, thus clearing and the settlement may be considerably faster now.
11. Audit trails to be eliminated
Cybersecurity and risk management in software solutions include preserving a “trail” of every transaction that occurs in the software. Audit trails are often stored in relational databases which may be tampered with easily, thereby causing distrust in the process.
It’s because of this that firms have to keep manual/printed records and third-party auditors are required to physically examine transactions of the business. This is an inefficient and expensive activity and takes a toll on the logistics operations of the firms involved as having an efficient procedure is one of the many steps that boost sales in logistics.
“Timestamped” proof of what happened when and how is stored in a blockchain’s audit trail. A permanent ledger is maintained that may be accessed at any time for auditing purposes and contains the history of all transactions. Since the transaction ledger is transparent and permanent, banks no longer need to maintain numerous audit trails of transactions.
You now have a solid idea of the many applications of blockchain in fintech businesses. 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.