Financial services requests a new way to manage the stock and derivatives market. This topic is about how blockchain revolutionizes financial services infrastructure.
The results of the World Federation of Exchanges database research show that the total value of stocks traded globally is about $77.5 trillion and the market is getting bigger and more complex by the day. With transaction times and operational costs at the forefront, major stock exchanges are exploring the potential of blockchain to enable near-instant payments and automate compliance through smart contracts, with a higher level of security and transparency.
With decentralization, the correlation between the distance from the stock exchange and the entry price is reduced, thus making the proximity to the exchange servers irrelevant. This will reduce the need for market intermediaries, reduce transaction costs, and create transparency in the stock settlement process.
Decentralized ledgers can simplify payments in retail banks, especially international payments that have high fees and take days to complete. Blockchain can also be used to verify the identity of customers in retail banking. Once a customer’s personal data is verified by an authority, they can be given a private key and a public key for the blockchain. The ledger then acts as a shared and decentralized mechanism for verifying the identity of customers between banks.
Switzerland-based bank UBS has led a consortium of global financial firms in a blockchain project that aims to accelerate back-office functions and interbank payments, possibly saving the industry billions of dollars. R3 CEV LLC, a New York-based company, leads the world’s largest blockchain-focused financial group, comprising more than 100 banks and regulators
The wealth management industry has grown rapidly over the past few decades and is expected to hit $145.4 trillion by 2025. To meet investor demand for a global suite of products , this industry uses intermediaries, making the process complicated and time consuming. The distributed ledger concept can enable transactions and payments directly across boundaries, which in turn can reduce costs, increase data accuracy, and reduce delays.
FundsDLT, a blockchain-based fund distribution platform, has been developed in partnership between the Luxembourg Stock Exchange subsidiary Fundsquare, the Post Group subsidiary InTech, and KPMG Luxembourg. Using smart contracts and distributed ledger concepts, FundsDLT is expected to provide asset managers with a new distribution channel with significantly lower transaction costs and latency. Fundsquare is also partnering with iHub, the innovation and hacker space for technologists, investors and tech companies, a blockchain-based Know Your Customer platform for the fund industry that is ultimately expected. will be integrated with FundsDLT.
The insurance industry, although slower than the banking industry in assessing the benefits of blockchain, has been making steady progress to benefit from it. The strongest use cases that remain blockchain in insurance can be mentioned are:
Promote efficient and fraud-free claims management: Automated classification and processing of claims via smart contracts, easy access to customer history and customer authentication centralized, all will improve the efficiency of claims.
Supporting Digital Transformation: Blockchain will provide computing authorities with access to contextual data, fully digitized, to greatly reduce effort and improve the accuracy of models and estimates. risk calculation
Facilitating Product Innovation: Blockchain, with its potential for near-real-time transaction settlement, will allow insurers to introduce new risk instruments and exploit capital opportunities in the market . Allianz, a leading multiline global insurance company, recently launched a blockchain-enabled solution for the captive insurance market. The insurance segment is a fertile soil of blockchain investment, so the company is looking forward to exploring some other opportunities.
Blockchain is a big step in management technology, not only Financial Services Infrastructure. Many financial experts believe that this hi-tech will be the key to open a new world – the blockchain age in the near future!
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