FinTech, like many other tech-driven industries, is constantly evolving. New financial applications seem to emerge daily, offering bold new approaches to managing and processing payments. As this industry grows steadily, the advent of blockchain technology threatens to bring an unprecedented level of disruption to fintech.
Although synonymous with cryptocurrencies like Bitcoin, blockchain use cases are continually expanding into new areas of finance, as well as healthcare, retail, entertainment, and transportation. .
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As we can see from the data above, fintech takes the lion’s share of the blockchain market, and for good reason. Over the decade, we’ll see digital ledgers capitalize on a fundamental shift in the way we send, receive, manage and store our money. Let’s take a closer look at how technology will make this possible:
Optimizing FinTech with Blockchain Technology
The blockchain essentially exists as an immutable block. With technology, it is possible to develop a whole ecosystem of fintech applications. Blockchain technology can transform regular financial processes into fully transparent procedures based on secure and efficient transactions.
When used correctly, blockchain can create a fintech ecosystem that can completely revolutionize finance. Financial transactions on the block do not require any middleman and are capable of establishing peer-to-peer networks, lightning-fast transactions and full transparency.
However, the application of blockchain in finance can be about more than transparent transactions. With blockchain technology, users can finally regain full control of their wealth, helping to pave the way for a fully democratized financial landscape.
Financial management without a bank
We have already seen massive cases of blockchain allowing individuals to manage their wealth without a bank in sight.
Those who choose to hold cryptocurrencies like Bitcoin, Ethereum, or any other form of digital asset, can do so with the use of blockchain digital wallets. These wallet holders are protected by private keys, while having their own unique public address to allow them to send and receive payments with others.
Through the use of blockchain technology, wallet holders who own their private keys are the sole owners of their assets – unlike traditional currency, no bank takes responsibility for holding your money.
“Bitcoin and other cryptocurrencies offer this freedom and ownership to the people,” says Carlos Barbero Steinblock, lecturer in cryptocurrencies, blockchain and the fintech industry at EU Business School. “You manage your own wealth, you don’t have to rely on or trust someone else with your money. “
With the total number of global blockchain wallet holders reaching 80 million globally in 2021, we can see clear evidence that the influence of blockchain in the democratization of finance is already underway – helping individuals create wealth. wealth in a way that gives them more control over their assets.
Currently, the verification of trust and identity is carried out by intermediaries and holders. Blockchain has the power to alter or even eliminate the element of trust that is at the heart of our current financial ecosystem.
Know your customer will take place in the form of a single, secure digital entry and cryptographically distributed across the network to eliminate multiple entry and verification. These security improvements are expected to directly help sectors such as retail banking, wholesale banking, investment banking, payment networks, lending markets, crowdfunding, asset managers , brokers and regulators.
Payments without borders
Another revolutionary feature of the blockchain is that it supports borderless transactions through the decentralized currency that uses its framework. Technology can also pave the way for faster and simpler payments, as it costs less to make transfers between accounts. Since blockchain transfers don’t need authorization through intermediaries and banks don’t have to use resources to transfer funds, payment processing fees for international payments are also much lower.
The blockchain will pave the way for a better flow of currencies in the world. Typically, banks charge around 10-15% of the amount transferred as a transfer fee – however, with blockchain, this figure can go down to 3%.
Blockchain payments, as we’ve already noted, are also extremely secure since all transaction participants in the chain must give their approval for the transaction to go through – and anyone can view the updated ledger for details surrounding the transfer.
In addition, since there is no need for third parties to transfer funds, it is also possible to use P2P transfers to leverage transactions. This allows banks to compete with fintech startups to generate their own fintech service suites.
Fintech has become an influential force in the modernization of traditional financial institutions. As a result, over the past 10 years we have made a faster transition to a cashless society, with more investment opportunities and options for storing our wealth than ever before. However, the emergence of blockchain technology is expected to strengthen the development of fintech – paving the way for a true democratization of finance and allowing individuals to manage their wealth without the need for intermediaries or large institutions themselves.