Almost two decades ago, the banking business comprised multiple trips to brick-and-mortar banks and conversations with real humans working at the offices. Today, people can keep tabs on their accounts, transfer funds and deposit checks while relaxing on the couch or even on the go. Digital technologies have brought a profound, positive change in the financial market and have gained mainstream adoption – be it mobile banking or robo advisors.
The latest innovation, blockchain, is poised to drive a colossal change across the financial services industry. With global, technology-driven business transformation, blockchain is believed to have an impact as big as the World Wide Web. This is why blockchain is often regarded as “the internet of money” or “the internet of programmable value”.
In time, blockchain is anticipated to eliminate the need for bank branches or boost competition by lowering the barriers to entry. The technology is in its nascent stage and extremely powerful, making it impossible to project its resulting consequences.
However, we need not look to the future to realize the impact that blockchain will have on the financial services. Many institutions have embraced FinTech blockchain solutions and are witnessing positive results.
Here are five blockchain use cases in financial services.
Trade Finance
The old practice of trade finance has undergone little change since its evolution. Its resistance to digitization over its history makes it a better applicant for blockchain technology as compared to other areas of the industry. Blockchain has the potential to transform trade finance for the modern world, strengthening it with more efficiency, transparency, and better opportunities for new revenue and lower cost bases.
Clearing and Settlement
Most clearing and settlement procedures are centralized, thus controlled by a central authority. The integration of blockchain into this area can transform it for better.
The CEO of the blockchain startup Chain, Adam Ludwin, anticipated that blockchain will eliminate the need for clearing and settlement. In an interview with Time, he said, “It’s as if I gave you a 10 dollar bill, and then asked you how do we clear and settle that payment. You would look at me funny because it doesn’t make sense.”
Whether it will happen or not, financial services organizations are already leveraging FinTech blockchain solutions to enhance their clearing and settlement practices.
Cross-border Transactions
With a conventional payment system, each international payment has to traverse through multiple banks to reach the final destination. This makes the payment slow, expensive since the banks en-route charge their fees, and uncertain as the amount of money that arrives on the other end is not known until the transaction reflects in the account.
Blockchain can tremendously address these challenges. It can lower the cost for cross-border payments by 127 times and accelerate the payments by 388 times.
KYC (Know Your Customer) and AML (Anti Money Laundering)
Blockchain is a secure, immutable and distributed ledger of transactions, thereby making it a perfect solution for adhering to KYC and AML regulations and serving as a trusted repository of identifying information. Blockchain-driven KYC and AML solutions can simplify creating, monitoring and maintaining digital identities, making them more efficient, user-friendly, secure and less vulnerable to fraud.
Banks in India and Singapore have harnessed FinTech blockchain services to implement blockchain for KYC and AML.
Insurance
The transparent and efficient nature of blockchain is helping it to automate compliance and reduce fraud. Research shows that 33 percent of insurers are looking to adopt blockchain in the next couple of years while another 36 percent of insurers have already integrated blockchain technology to enhance their operations and services.
These are the five most common use cases for blockchain in financial services. To capitalize on blockchain potential, financial institutions need to build the infrastructure required to operate a global network using solutions pivoting around this transformative technology.
If you are planning to integrate blockchain into your financial system, we can help you ride the next wave of digital business with our FinTech blockchain development services. We will support you at every step of blockchain adoption, from design-thinking-driven evaluation to assessing a blockchain solution from various dimensions, creating proof-of-concept and pilot development to complete implementation of the solution.
Talk to our experts to share your needs.