Even though blockchain technology is still in its early stages, it is already changing many industries. It seems like everyone is interested in this new idea, from banking and retail to gaming and entertainment.
But the financial services industry is one of the best places to use blockchain. With the blockchain in finance market size expected to reach $22.5 billion by 2026, it is clear that there is a lot of room for growth in this area.
Given how promising blockchain development is for the financial industry, we've decided to dig deeper into the topic and tell you some important things about how the technology is being used in this field.
First, we will talk about what blockchain is and how it can help finance companies. Then, we'll talk about how blockchain can be used in different parts of the finance industry. Let's get started.
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- In 2025, Mobile Games will be the largest segment, with a market size of US$182.50bn.
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Let’s Understand - Blockchain Technology?
Blockchain is a digital ledger where transactions can be kept track of. It's basically a secure, distributed, and decentralised database that can store blocks of information in a chain. The first time the technology got a lot of attention was in 2009, when it was used to start the Bitcoin currency.
Technology is already changing many industries, such as finance, healthcare, retail, and insurance, and it doesn't look like it will stop anytime soon. Even though blockchain is still in its early stages, the key players in these industries are interested in it because of the benefits it offers.
Key Benefits of Blockchain For Financial Services
Demand for blockchain development services is growing everywhere, but especially in the financial sector. This shouldn't be a surprise, since they can help financial institutions in many ways. Let's look at each one in turn.
Security
At the moment, the financial industry is very centralised, and transactions must go through a number of middlemen. This not only causes bottlenecks and puts data safety at risk, but it also makes the system less clear.
Blockchain reduces the risks that can come from third parties and centralised databases by a large amount. Since the technology is spread out, it makes it easier to create secure workflows than traditional systems, which are easier to hack.
Also, because the transaction ledger is encrypted, only people with their own key codes can get to the data. Because of this, blockchain is especially appealing to people who work in the financial sector.
Transparency
We just talked about how using blockchain in finance can get rid of or at least cut down on the need for middlemen. In this way, it helps make financial institutions more open and improves how they report to regulators.
Also, central banks are looking into ways to use blockchain and build new systems for sharing data between related participants. This makes the process easier to monitor and more transparent.
Less Costs
Financial advisors, brokers, agents, and other middlemen all charge fees for the services they provide. So, once the middlemen are gone, operational costs go down by a lot.
For example, the smart contracts built into the Ethereum blockchain are very popular. Because of them, agreements can be carried out right away if certain conditions are met. This eliminates the need for middlemen and the fees they charge.
Lower Risks and Errors
Using blockchain in banking and finance in general can also help control risks and cut down on mistakes. The technology makes it possible to settle transactions quickly and keep track of them, which helps keep an eye on how money is managed and how credit risks are handled.
Also, because there are fewer people in the middle of the process and all data is recorded, there are less chances of human mistakes and more ways to find them and fix them.
Efficiency
As was already said, blockchain does away with the need for middlemen. But this not only saves money and makes things safer, it also makes things much more efficient. No longer is it necessary to deal with middlemen and wait for them to get everything in order. Instead, things can be done much more quickly.
As you can see, blockchain-based fintech can be useful and is a technology that shouldn't be taken for granted. So, if you want to find out how to use blockchain in the financial industry to improve security, cut down on recurring fees, and make things run more smoothly, keep reading.
How Blockchain Can Be Used in Finance?
So, how does blockchain help with money? Today, we'll talk about five important parts of the finance industry: banking, real estate, insurance, investment management, and accounting and auditing. Let's look at the most important ways this technology is used in these five areas.
Banking
Most likely, banking is one of the places where fintech can help the most. In fact, almost 30% of the revenue from the global blockchain market in 2020 went to banks.
So, what kinds of bank transactions can use blockchain? Here are some of the biggest:
Recordkeeping
One of the main ways that blockchain is used is to store information. The technology can help finance companies keep all of their important information safe and only let the right people access it.
Payments
Banks can use technology to avoid the problems that come with traditional money transfers and use it as a key differentiator to gain a competitive edge. In particular, banks can improve their services and get a bigger share of the market by helping people save time and pay less for transactions.
Loans
At the moment, clients get loans after underwriters look at their credit history. As you might expect, this can take some time and puts the security of the financial institution at risk. But with blockchain, everything can happen much faster and safer. Because it's not based in one place, customers don't have to worry about their information getting out, and their loans can be approved faster.
The truth is that there are a lot more ways that blockchain can be used in banking. After all, there are many ways to run a business in this field. But let's move on to the next use case for now.
Real Estate
Digital channels have never been a common way to complete real estate deals. Most of the time, they involve meeting face-to-face, talking, and signing a contract. As you might guess, blockchain means that it doesn't have to be that way anymore.
With their ability to record and transfer property ownership, smart contracts are already changing the way money is spent on real estate. People don't have to involve third parties like lawyers, brokers, or banks in their transactions when they use smart contracts.
With blockchain, both parties to a real estate deal can use a smart contract to transfer the property and the money in a clear and safe way.
Insurance
Insurance is an area where fraud happens a lot. So, it can take a long time to settle a claim, which can make customers leave. Luckily, a blockchain consulting firm can speed up the whole process and make it easier to manage claims. Once more, smart contracts come into play and make settlements and insurance payments happen automatically.
Just like in banking, blockchain can help protect sensitive information in insurance. Since insurance companies give out policies based on a lot of information, it's important to keep it safe. The encrypted and decentralised nature of blockchain makes it less likely that data will be changed or tampered with. This can make you and your customers feel better about the security of all the data you store.
Investment Management
We've said more than once that blockchain is still in its early stages. But its potential to cause trouble is talked about everywhere.
Also, cryptocurrencies are one of the best ways for investment firms to make sure their money goes to the right people. So, it shouldn't be hard to keep track of investments and make sure accounts are correct. So, if you're in the investment business, you might want to look into how developing financial software can help you grow.
Auditing and Accounting
We already know that blockchain's distributed base could make it easier to keep track of all records. But it can also have an important effect on auditing. Auditors have to go through the process of checking accounts and looking for discrepancies. This can be a long and difficult process.
Everything is made easier by blockchain. By adding records directly to the ledger, it is much easier to store and change data. Also, the ledger can show proof of money transfers in real time, which can't be argued with because it is accurate and clear.
What's next for Blockchain!
Since it's getting more and more attention every day, the future of blockchain in finance looks pretty good. Businesses want to use technology to make their operations safer, cut costs, and make them more efficient. Even though there are some worries about how it will be regulated, blockchain is still a hot topic of conversation among industry leaders.
