Fintech is disrupting the financial industry and the blockchain development companies in this sector have a major advantage going forward. The speed and scale of this disturbance will depend mostly on users adopting this new economy. People have already given their verdict – they are tired of black boxes, and want to determine how they pay for data and financial transfers.
Why are there lengthy and costly money, asset and information transfers through multilayer schemes with several intermediaries? Since we are not waiting days to send urgent worldwide mail, this technology is expected to work for us, right? Why then should we recognise cross-border payments with lengthy lead times? Is this a matter of confidence?
Perhaps, to provide advice, safety or dispute resolution, we still depend on traditional banks. They guard us against commitments, and are viewed as guarantors of our rights and contracts by government institutions.
Blockchain technology in fintech
Even if blockchain does not solely concentrate on financial services, this article focusses on fintech firms using this technology to enhance their stack. First, let us identify the differences between the three primary blockchains before delving into the particulars of this decentralised ledger.
Blockchain, an original word, is indeed an unbelievable invention. Originally the brainchild of Satoshi Nacamoto that started this technology in bitcoin. Nacamoto is a pseudonymous person or persons who developed bitcoin, and also authored the bitcoin white paper.
It is a digital business transaction leader that cannot be manipulated or altered. It is designed to record not only financial but all other activities with a set value.
This technology enables the distribution and copying of digital data across different nodes. Any wrong change or modification will alter the hash connections, and it is easy to detect a malfunction. This is because of the complicated and intricate cryptography behind it.
Fintech industry impact with blockchain
According to PWC’s study of financial services and fintech, about 77 percent of the financial services industry is planning to adopt blockchain by 2020. By 2020, banks, which were 1/3 of the organisations investigated, were inclined to incorporate blockchain into their activities, as recorded in a survey of eight of the 10 largest global investment banks following the blockchain path, according to a report released by Accenture and McLagan (January 2018).
This is complemented by a similitudinal estimate of the blockchain market growth of up to $7 milion by 2022, produced by strategic consultant Jeff Koyen from 360 Blockchain (a firm focused on investment in blockchain-using systems).
The blockchain sector in fintech has been intended to provide banking with a more seamless and effective experience, from cost reductions (anticipated savings of around $15-20 million by 2022) to uncheck unconditional bureaucracies in the traditional banking sector. This augurs well for both the bank and the clients.
While blockchain promises to correct inefficiencies in most banks’ back-office set-ups notably in procedures like clearing and settlement, the most significant effect this technology will probably have is to reduce fraud and cyber attack in the financial world, significantly. Blockchain assists in curbing data breaking and other comparable fraudulent operations to enable fintech businesses to share or transfer safe and unaltered information through a decentralised network.
It is thus no wonder that leading business executive and media personality Don Tapscott has blockchains as a distributed leash technology, with a much higher capacity than the Internet itself. Blockchain has a significant tangible effect on the financial services industry. After all, startups in the fintech sector receive more financing than ever before, and in the past four years, the funding rose at 41 percent, and the investment in PWC Global Fintech 2017 crossed more than $40 billion.
Different inventions came with blockchain’s assistance. Smart contracts are one such invention which guarantee that before a contract or transaction between two parties is concluded commitments are met. Innovative companies covering a range of sectors use this technology today.
Expertise from the fintech industry
Fintech has interrupted the traditional industry of financial services and increased opportunity for fresh market entrants and technology-focused startups in the industry. While exciting, the Fintech revolution cautions and thoroughly monitors the regulatory and practical hazards connected with new innovative techniques and platforms.
Thus, pertinently, my company Adore’s attributes are unique in helping new and established businesses in Fintech to pass through changing legal frameworks. A range of members from the industry, including digital consultants, digital lenders, other alternative economic platforms, and mobile payment and deposit solution providers, consumer finance firms and financial sponsors have accessed our company’s solutions.
It is the first digital lending platform to be licensed by the Ontario Securities Commission with an exempt commercial distributor (EMD).
The banking industry’s globalisation
Big banks are now operating globally. For US-based banks like Citibank, JPMorgan, American Express, and others, the trend is similar. Emerging markets have great possibilities for market growth, and it is wrong not to understand this trajectory. Acquisitions of banks and fusions with fintech enables banks to compete and continue to serve clients.
Research has shown that international banking can benefit the banking sector in two ways: Firstly, worldwide banking structures make much-needed capital, know-how and new techniques accessible to make national economic systems competitive; secondly, global finance businesses enable risk-sharing and diversification to reduce the impacts of volatile domestic markets.
Fintech regulation gets different
Finance is one of the most massive regulatory systems in the sector. Financial organisations are currently leveraging new technology, gathering vast information, and using self-service batteries. Regulations in this industry must, therefore, improve naturally. Both in the USA and Europe, regulators are looking for fresh ways to regulate the sector, particularly in perspective of the Blockchain Revolution.
For fintech, regulatory authorities are presenting regulatory or regulatory sandboxes. In February 2018, the European Commission enacted fresh fintech regulations. These are recommendations on internet safety, blockchain, and cloud information services. Recommendations in the United States include fintech companies not controlled by a single government regulator or federal government regulator. No fewer than 10 federal agencies are engaged in these fintech regulations. The method of developing new rules has, however, already begun. Arizona was the first US state this year to launch fintech companies’ legislative sandbox.
Digital-only banks’ market share is expanding
New technology is being adopted by the banking industry quickly, and digital service channels are top priorities. Capgemini’s top 10 retail banking technology trends report demonstrating that these new banking companies offer today’s digitally knowledgeable consumer’s extremely innovative products and services.
Online banks only imply significantly less overhead and costs, as a bank doesn’t have to pay for office premises and employees’ salaries. They boost competition with traditional banks as younger clients prefer to manage their finance online via smartphones by offering their digital products.
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)
(Edited by Suruchi Kapur- Gomes)