According to one of Accenture Company’s studies, more than half of all top managers believe blockchain will play a critical role in the success of financial companies in the coming years. According to the analysis, implementing blockchain in the banking sector could save up to $20 billion by 2022.
Blockchain has a wide range of applications, including cryptocurrency and smart contracts, financial services, supply chain management, and many others. Not only that but the advantages it provides to any financial institution make Blockchain a must. Below is how blockchain is reshaping Fintech.
Because the blocks in the blockchain maintain an accurate history of transactions and multiple copies are created, it is difficult or impossible to change or delete the data in the blocks. To do so, each copy of the block must be changed, which requires successful hacking. However, it is practically impossible.
The entire system is distributed. There are several copies made. A public Blockchain is published and replicated in various locations. Newer transactions are broadcast to an extensive network of participants, who add them to the log. The ledgers are managed without the involvement of humans, but the system is designed so that each log contains the same information.
Transferring money internationally using traditional methods has become inefficient and costly. There is room for improvement, and banks have used blockchain for remittances. Blockchain technology helps to reduce cryptocurrency exposure and improve remittances. Several banks have partnered with Ripple (payment protocol) to use blockchain technology to facilitate international payments.
Money transfers using the blockchain method save banks time while also benefiting customers. Payments can be transferred online using mobile phones thanks to implementing blockchain technology.
Another advantage of using Blockchain in the financial industry is that it helps keep track of transactions, which is helpful in various areas. The blocks maintained in technology contain the information, making tracking ownership more accessible and efficient.
Blockchain is highly resistant to hacking, data modification, and deletion, DDOS attacks, and other forms of fraud. The reduction in fraud reduces business costs, and the savings benefit everyone. The enabled digital ID in blockchain makes it easier to recognize individuals accurately.
When we use traditional payment methods, the funds pass through banks, credit card processing companies, and other intermediaries. Each step increases the complexity, and all service providers who act as intermediaries expect to be paid for their role in money transfers.
However, when using blockchain technology to make payments, merchants must pay processing fees, which eat into profits, proving beneficial to merchants. Cheap blockchain payments are a must-have for merchants.
Payments made by check can also be problematic when the check bounces. In addition, electronic payments from customer checking accounts are unsuccessful. However, blockchain-based payments provide merchants with certainty in a matter of seconds.
People who avoid bank accounts because of high fees, minimum balance requirements, and lack of access may benefit more from blockchain solutions. Blockchain can promote financial inclusion by lowering costs and allowing startups to compete with banks. Banks only require a mobile device instead of assets and regular income. Identifying an individual becomes difficult with traditional payment methods, whereas digital IDs can be helpful in this situation.
Blockchain technology is still relatively new and somewhat amorphous, despite many businesses and banks experimenting with and developing the technology. Undoubtedly, blockchain is the safest technology to implement in the Fintech industry because it excels in terms of security and privacy. By implementing blockchain, all the problems associated with traditional methods can resolve. If you need or want advice on blockchain development services, contact SmartOSC.
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