Digital technologies like Blockchain, AI, Machine Learning, and IoT are bringing drastic changes to financial services. The age-old banking and financial system are witnessing huge challenges from emerging FinTech companies.
In fact, Blockchain technology is bringing positive changes like convenience, security, financial inclusion, and digital services to existing financial services. Many finance businesses are rushing toward the best blockchain development company to hire Blockchain developers.
In this blog, we are going to discuss how Blockchain technology is transforming financial services.
To understand the impact on the financial services, we first need to learn a few things about Blockchain Technology
What is Blockchain?
To keep things simple and understandable, we can say that blockchain is the concept of a distributed ledger. Furthermore, it is a decentralized technology, which means that the chunks of data are stored on multiple computers instead of central servers. Above all, a long series of blocks are connected together to a readable piece of data. This record-keeping technique is proving to be very successful in different industries such as healthcare, finance, entertainment, manufacturing, etc. For this reason, many finance businesses are also looking for the top FinTech app development company to develop their blockchain apps.
Let’s learn about its impact
Revolution in Stock Markets
Some of the major stocks around the world have already started experimenting with Blockchain technology to reduce transaction time and operational costs.
This is done by enabling immediate stock settlements. Furthermore, the use of Smart Contracts has made it possible to automate compliance with better security and transparency. In fact, NASDAQ is already using Blockchain technology for issuing and sharing private securities.
Improvement in Asset Management
The global finance and trade industry has grown into a trillion-dollar industry. Thus, it has become very challenging to manage everything with legacy technologies. Furthermore, it is already expected that by 2025, the industry is expected to grow by $150 trillion USD.
Today’s asset management network largely relies on centralized technologies. This system might not be reliable and transparent because someone in higher authority always has control over the data. Therefore, Blockchain technology is providing to be very effective in enabling direct trade and settlement between countries and economic zones. Furthermore, it is also an effective technology for reducing operational costs, data accuracy, and reducing delays.
Financial businesses can drastically reduce human errors, frauds, and misinterpretations of data when they use Blockchain technology.
Improved Efficiency of Payments
Traditional financial services have never been efficient before. Thus, Blockchain technology is greatly improving the efficiency of payment transparency and efficiency with its robust architecture. In fact, instant payments are now possible with Blockchain technology.
Earlier it used to take around a week to process international payments. The emergence of digital currencies has made the payment process a lot faster, cheaper, reliable, and more convenient. Even the central banks have understood the potential of Blockchain technology in transforming financial services. Thus, they have also started experimenting with their payment systems with distributed ledgers.
Blockchain technology removes the necessity of a middle office that would usually help in settling the payments. Even though the technology is still in its infancy. However, a lot of new methods could be invented for making smooth payments. Blockchain with its distributed ledger is going to be the fastest and cheaper mean of payment processing.
Improvement in Compliance Processes
KYC is an important process of identifying the users using the banking services. Thus, financial institutions have to comply and report to their local regulators. The KYC process has always been a time-consuming and cumbersome process.
Using Blockchain technology is making the KYC process super effective and streamlined. In fact, banks are finally able to reduce duplication and improve trust among their customers. They are able to completely automate the customer identification by assigning a digital ID to each customer. This enables the smooth exchange of documents between the banks and other parties. The privacy is data is also ensured and maintenance costs can also be reduced.
Better Fraud Detection
The insurance industry is a major industry within the financial services industry. Blockchain technology is proving to be very effective in automating claim sorting and processing tasks. Above all, this was only possible because of the smart contracts.
Finance companies are able to improve the claim settlement process by having centralized customer authentication, cross-industry data sharing, and easy access to customer history. Previously, manual claim settlement used to take ages since there were several parties involved in the process.
These parties have to cross-check, reconfirm, and more, which only leads to delays and inefficiencies. By using Blockchain technology, we are able to connect these parties via a shared and secured network. This drastically streamlines the entire process and reduces inefficiencies.
Auditing is More Effective
The auditing process is very important for banks to verify accounts and discover any inconsistencies. The majority of banks take hours to audit the accounts of their customers. Furthermore, this is a mandatory process because of compliances set by the authorities and the government.
Data integrity is the most important factor in the auditing process. Without integrity, we cannot audit the genuineness of the account data. Blockchain technology can prove to be very effective in maintaining and analyzing this data. It is a far more effective way of storing and updating data for banks and financial services.
They can store the data on a general ledger instead of taking data from multiple sources. Furthermore, it is also possible to verify the transactions with smart contracts and automatic invoicing systems. This makes the auditing processing simpler without any manual intervention. Lastly, Blockchain is also immutable, thus, transparency and accuracy can also be assured.
Blockchain technology is still in its infancy. However, the technology has evolved greatly after emerging as an infrastructure for cryptocurrencies like Bitcoin. Today, many financial institutes have found lucrative applications of Blockchain technology. If you are also thinking to build your Blockchain app for your financial services, then you should consult the top mobile app development company. They can help you to go through the challenges of the app development process with ease.
By building your own Blockchain apps, you will be able to provide quick and transparent FinTech services. Even though the technology is relatively new, you can still develop an app with experts and gain a competitive edge over your competitors. Finally, your organization will be able to provide faster payments, deep identification, and simpler audits.
The traditional banking institutes have also started to experiment with Blockchain technology to bring lucrative changes to their list of services. Thus, you should also take this opportunity and make a difference in your customer experience.
Josephine Baker is a professional mobile app developer at MobileCoderz, a top mobile app development company. Over the years, she has developed many FinTech and Blockchain apps with her team. Lastly, apart from her professional life, she takes a keen interest in surfboarding and playing with her dogs.
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