Fintech Revolution 2023 - What Major Shift Does Blockchain Bring?

Fintech, similar to many other technology-driven sectors, is undergoing constant changes and advancements. Daily, new finance applications are emerging, proposing innovative solutions for payment handling and processing. Despite its consistent growth, the integration of blockchain technology into fintech has the potential to cause significant disruptions.

Blockchain, famously known for its association with cryptocurrencies such as Bitcoin, has expanded its application beyond finance into various industries, including healthcare, retail, entertainment, and transportation. In this article, I’m going to discuss the how fintech revolution would bring a major shift in the blockchain industry.

Optimizing Fintech with Blockchain Technology

Blockchain is essentially a permanent block. With this technology, a comprehensive ecosystem of Fintech applications can be created. Technology has the power to convert conventional financial processes into fully transparent and secure transactions.

When implemented effectively, blockchain can revolutionize finance by creating a fintech ecosystem that operates without intermediaries and enables swift peer-to-peer transactions with complete transparency.

Moreover, blockchain's application in finance goes beyond transparent transactions. It provides users with full control over their wealth and lays the foundation for a decentralized financial system.

Blockchain In Fintech Industry?

During 2023-2032, the global fintech blockchain market is expected to grow at a CAGR of 40.66%. Several factors contribute to the market growth, including a surge in blockchain technology investments, an increase in small and medium-sized enterprises (SMEs), and a boost in startups. Let’s take a look at how this technology is embracing the Fintech industry.

1. Bankless Financial Management

We have witnessed numerous instances where blockchain technology has enabled individuals to manage their wealth independently of traditional banking systems.

Individuals who hold cryptocurrencies such as Bitcoin, Ethereum, or other digital assets can utilize blockchain digital wallets to secure their assets. The wallets are protected by private keys and have a unique public address that enables the users to send and receive payments.

With this technology, wallet holders who possess their private keys are the sole proprietors of their assets, unlike traditional currency where banks hold the responsibility of safeguarding your money.

2. Revolutionizing KYC

Currently, trust and identity are verified through intermediaries and incumbents. The blockchain has the potential to alter or even eliminate the core element of trust in our current financial system.???

As part of Know-Your-Customer, a single digital entry will be encrypted and distributed across the network to eliminate multiple entries and verifications. Retail banking, wholesale banking, investment banking, payment networks, lending marketplaces, equity crowdfunding, asset managers, broker-dealers, and regulators will all benefit directly from these improvements in security.

3. Borderless Payments

Another remarkable aspect of blockchain technology is its support for seamless cross-border transactions through its decentralized currency system. It also leads to quicker and more streamlined payments due to the lower cost of transferring funds between accounts. With no need for middleman authorization and reduced resources required by banks to transfer funds, the processing fees for international payments are significantly reduced.

Technology holds the potential to improve the flow of currency globally. Traditionally, banks charge a remittance fee of 10% to 15% of the transferred amount, but with blockchain, this fee can be as low as 3%. Blockchain-based payments are highly secure since they require the consent of all participants in the chain's transaction before they can be completed. Additionally, anyone can view the updated ledger to verify the details of the transfer.

The absence of intermediaries in fund transfers also enables peer-to-peer (P2P) transactions, providing banks with the opportunity to compete with fintech startups by offering their own suite of fintech services.

4. Web 3.0

The decentralization aspect is crucial in Web 3.0. Currently, the internet is controlled by centralized entities such as large tech companies. But with Web 3.0, ownership is distributed among both builders and users, similar to the blockchain technology that drives it.

This opens up the possibility for a new, alternative model that is only emerging in limited areas currently.?

For example, if you and a group of like-minded individuals wanted to form a community, similar to a Facebook group or a local club, and manage it through its own set of rules and currency system, Web 3.0 is making it possible. This concept is already underway, although it may take some time before it becomes widespread. Nevertheless, we are already seeing glimpses of experimentation in this field and we can expect to see more progress in this direction this year.

Fintech Market Insights

Blockchain technology is transforming the financial industry with its distinctive features such as high data security, transparent infrastructure, fast data transfer, and cost-efficient operations. The fintech blockchain has numerous potential applications in areas such as KYC, identity management, payments, trade finance, etc. It simplifies the complicated nature of current financial sector operations and enhances the speed and security of these processes.

In addition, this technology can create a secure value transfer system that streamlines business processes across the financial sector. Its adoption also boosts record transparency and audibility, minimizing the requirement for trust between stakeholders.

Examples of Disruption through Blockchain

• Decentralization of Financial Services

Digital currencies, such as Bitcoin, have transformed how we view money as the first and most popular use of blockchain technology. Using decentralization, individuals and businesses can exchange currency directly without a third party or middleman. Through its decentralized computing system, this process eliminates several fees typically associated with transferring funds between accounts.

• ?Insurance Industry?

The impact of blockchain is spreading to the insurance sector as well. Newer insurance firms are now starting to introduce products based on this cutting-edge technology. One notable example is Etherisc, a platform built on the Ethereum blockchain that offers decentralized insurance applications and the ability for users to create and sell their own insurance products.

This presents numerous opportunities for consumers, including access to more affordable premiums and a wider range of coverage options. The advent of technology has changed the perception of money, smart contracts, and privacy and security issues in fundamental ways.

• Smart contracts

The use of blockchain as a verification tool for smart contracts revolutionizes the traditional business agreement process. The removal of intermediaries makes the process faster and more cost-effective.

For example, the airline ticket distribution industry benefits from this technology by allowing ticket distributors to verify ticket purchases without having to contact individual airline companies. Airlines can also update their inventory information directly on the platform, eliminating the need for constant email or phone communication with the distributor.

Looking Ahead

Fintech has established itself as a powerful driver of change in the modernization of conventional financial organizations. Over the past decade, this has led to a quicker shift towards a cashless society, with an abundance of investment options and ways to store wealth. However, the advent of blockchain technology is poised to further boost the growth of fintech, leading to the democratization of finance and enabling individuals to manage their wealth without the need for intermediaries or large institutions.?

For any further details regarding digital transformation, visit Gyan Consulting.