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In 2021, Paypal settled payments worth approximately $940 billion. On the other hand, the ethereum network settled transactions worth about $1.5 trillion in just the last quarter of 2021. Well, cryptocurrency and blockchain technology is now termed the financial innovation that is revolutionizing how financial services are offered.

A combination of blockchain, cryptocurrency, and finance led to the rise of Decentralised finance (DeFi). DeFi involves offering financial services without intermediaries with the help of the blockchain and digital currencies. The latest report by DeFi pulse showed that DeFi market share grew by 10% between May 2020 and February 2021.

Well, you can’t talk about blockchain and the financial revolution without talking about artificial intelligence (AI) and machine learning (ML). Let’s dive deeper:

What is Blockchain?

A blockchain can be described as a digital ledger in which transactions made in cryptocurrencies are automatically recorded and maintained across many computers (nodes) connected in a peer-to-peer network.

Blockchain offers the financial industry more security, higher transparency, less fraud, and cheaper costs for both consumers and financial institutions.

How is Blockchain Being Applied in Finance?

  1. Stock Markets

Some of the biggest stock exchanges have explored the potential of using blockchain to enable almost instant settlements of stock by reducing operational costs and transaction time. Smart contracts enable automated compliance and higher levels of transparency and security.  Examples include; NASDAQ, which applies blockchain technology in sharing and issuing private securities, and London Stock that’s exploring opportunities that blockchain can offer in changing how securities are traded.

  1. Payments

Blockchain offers more efficiency, transparency, and security in payments as well as lower costs of financial services. Also, payments are instant with blockchain compared to traditional finance in which interbank transfers could take up to a week to complete.

Central banks have been exploring the possibility of using b, blockchain to achieve cheaper and faster payments. Project UBIN for Singapore identified some obstacles that may be addressed in the 2nd phase of this blockchain project.

  1. Asset Management

By 2025, the asset management sector is expected to increase by $150 trillion. Blockchain is aimed at handling processes that are time-consuming and complex. The concept of distributed ledger being applied in trading and settlements helps in reducing delays and costs while ensuring higher data accuracy in the processes.

FundsDLT, a funds distribution exchange powered by blockchain is a great demonstration of the application of blockchain technology in asset management.

  1. Insurance

The insurance industry has been increasingly finding new ways to incorporate blockchain tech intervention. Blockchain technology allows the use of smart contracts to automate claim processing as well as sorting.

Claim settlement involves several parties, i.e insurer, broker, and client. These parties need to have efficient communication. Blockchain becomes the link. It enables easier access to client information, data sharing, and customer authentication making the process transparent and fraud-free.

A good example is LenderBot, which is a micro-insurance with blockchain intervention. It’s a representation of how the insurance industry can leverage blockchain technology.

  1. Improving Compliance Processes

KYC for financial institutions is an important requirement globally. Financial institutions are required by the local operators to meet several compliance and reporting requirements. This can be labor-intensive, time-consuming, and prone to errors.

Blockchain solutions provide KYC updates, reduce workload duplication, and increase transparency/trust. Blockchain automates customer identification and allows seamless exchange of documents between the bank and other sources. With blockchain, the institutions can: automate account opening, maintain data privacy and reduce costs.

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