Blockchain benefits transforming FinTechs
By: Flavia Mocan
Tags: Blockchain, Fintech, Blockchain Tech, Financial, Blockchain Technology

Don Tapscott, Co-Founder and Executive Chairman of the Blockchain Research Institute held a TED Talk a few years ago saying that “The technology most likely to have the greatest impact on the next few decades has arrived. It’s not Social Media, big data, it’s not robotics, not even AI, and you’d be surprised to know it’s the underlying technology of digital currencies such as Bitcoin. It’s called Blockchain.” Well, it’s four years later, and the reality is, he was absolutely right.

Even though it was initially created to support the idea of Bitcoin, blockchain is not limited to cryptocurrencies. Still, due to its decentralized nature, it can be incorporated into any business. With plenty of uses in healthcare, manufacturing, supply chains, and even education, blockchain affects and changes everyday life in extraordinary ways.

But even though blockchain is just as intriguing no matter which domain it tackles, in the following, the focus is on its impact on FinTechs.

Back to the beginnings

If you feel passionate about cryptocurrency or already invest in such digital assets, the name Satoshi Yakamoto is probably already familiar. It’s the name of the person or group that created this blockchain technology to develop Bitcoin further. This technology is a decentralized, distributed, and public digital ledger used to record transactions. What makes it unique is the fact that blockchains are impossible to crack. One block cannot be altered retroactively without the alteration of all subsequent blocks and the network’s consensus.

“Time is money” might be one of the oldest sayings there is, but in the fast-paced world we live in nowadays, it has never been truer. That is one of the biggest reasons why fintechs and the banking industry had to incorporate blockchain technology as soon as possible. With so much technology around us, we can instantly communicate with someone on the other side of the globe, with the click of a button, but it might take around three business days to transfer money to the same person — this, of course, with commissions to a third party involved. Well, the first thing that blockchain did with Bitcoin, and later in fintech, was to eliminate the third party and bring everything closer to the user — faster, easier, and with no intermediaries. This, of course, was a great success as the adaptation of FinTechs is growing in all economics worldwide, and the blockchain in the financial technology market is expected to reach 6700.63 million dollars by 2023.

The opportunity

With so much at stake, it’s no wonder that FinTech companies turned to blockchain and now operate with them.

Nearly 40% of new fintech firms in Hong Kong are operating in the blockchain sector.

Blockchain comprises the fastest-growing segment of the territory’s fintech industry.

Around 77% of the financial services industry will adopt blockchain for some parts of their operation in 2020.

A 2017 report by PWC revealed that 77% of fintech companies expect to involve blockchain as part of their systems.

The benefits of blockchain technology

Still wondering what’s the big deal about blockchain technology? Then take a look at these three undeniable benefits.

Decrease the cost of various transactions. Blockchain has enabled peer-to-peer transactions. There is no need for a middleman in an office to clear the transaction, protect data, charge commissions, and ensure a safe transaction. It also makes online payments possible — which are fast, dynamic, and, ultimately, convenient. When referring to the equity markets, in the long term, blockchain means fewer costs for record-keeping and trading on the platforms. The peer confirmation also implies an almost instantaneous process, compared to the classic transfers that take up to a few business days to complete, when talking about international transactions. As all participants have access to the transaction’s records and therefore holding’s investors, blockchain is responsible for complete transparency. Global payment options. The peer-to-peer transaction is valid even in the case of international or global transactions. Blockchain transactions are internet-based and don’t need a special kind of set-up. As a 2016 Statista study showed that over 60% blockchain-based transactions involved cross-border payments, the instancy and reduction of costs were two features highly expected. Identity theft issues. In a more traditional way, wanting and applying for different banking services required paperwork, thorough research, background checks, and, most often than not, face-to-face sit-down. Through the use of blockchain technology in fintech, the verifying parties don’t need to check “the validity of the actual data in the provided data, but rather use the blockchain to check the validity of the attestation and attesting party from which they can determine whether to validate the proof.” To get a grip on what this means, when a fintech asks for documentation, rather than assessing the data inside the document, they simply verify the documentation issuer’s validity. This makes for a faster, more reliable process of verification. In the end, data isn’t stored or endangered by identity thieves, but rather safely deposited in the blockchain that can’t be interfered with.

Final thoughts

New or emerging technologies aren’t to be ignored. They hold a lot of issue solvers that we longed for. Whether as mere consumers, investors, bank operators, fintech startups or giants, blockchain solutions can ease traditional processes, create safer environments for transactions and acquisitions. They can offer better data protection, make instancy a primary selling point and arguably most important, improve the user experience. Nonetheless, the stakes are high, but the benefits priceless.