10 Key Advantages of Blockchain in the Fintech Industry in 2024

10 Key Advantages of Blockchain in the Fintech Industry in 2024

Blockchain is the most well-known term used in technology at the moment. It is among the most critical technologies that could help businesses transform in a new manner. However, many companies still need to discover the advantage of blockchain technology.

Similar to any other industry that is tech-oriented, generally, Fintech is also developing. Many new fintech-related apps are emerging daily, providing new methods to manage and process payments.

Fintech owns the most significant portion of the blockchain market, and it's for a reason. In 2028, the Fintech market is expected to be worth $36.04 billion. Decentralized finance (DeFi) is a revolutionary financial technology that uses Blockchain to limit banks' influence on financial services. It will be an innovative financial technology that utilizes Blockchain. We'll see a change in how we send, receive, and store our money over the coming years.

What's FinTech Blockchain?

Fintech is set to begin a brand new phase in 2022. Numerous fintech companies have thrived since 2000. In the last few years, many companies have experienced tremendous success using modern technology and solutions centered on customers to resolve issues within today's financial system.

DeFi, also known as Decentralized Finance, is the newest emerging star that uses decentralized intelligent contracts. Numerous financial institutions have begun investing in blockchain technology to finance R&D. This proves that finance and blockchain companies don't have to conflict. They can complement each other and enhance their performance.

DeFi is all about the integration of Fintech and Blockchain. Although they're not identical, there is a great deal of similarity between their applications in financial services. Blockchain is well-known for its decentralized, distributed, transparent, immutable ledger technology. This offers a new degree of security and independence. Blockchain components in DeFi firms provide an alternative to traditional financial elements. Stablecoins are a cryptocurrency that customers can use directly and eliminate the need for an intermediary.

Must Read : Top 5 Blockchain Development Frameworks in 2024

Optimizing Fintech Using Blockchain Technology

Despite numerous technological improvements and integrations, the finance sector continues to function as an integral model. The core of the model is financial institutions and the government. Although it's an old custom, many consumers of financial services are starting to question its worthiness.

This is the reason for the rise of blockchain development services. Fintech has taken on a different dimension due to technology, described as a technological revolution in the financial sector. It has brought about significant adjustments to operating models and business models within the fintech industry and has created new possibilities for the industry.

Startups and financial application development businesses have expressed keen interest in exploring Blockchain's role in Fintech. We'll be discussing this in the following article.

Before we dive deep into the specifics of the Blockchain's use in the financial sector, it is crucial to ensure everyone knows the basics of what Blockchain means and how it functions.

Let's say you're aware of Blockchain. Let's now look at the Fintech issues this technology has solved.

Fintech Industry Blockchain's Challenges

Management mistakes in the fintech sector often lead to missing goals, delayed raising cycles and increasing losses. Here are a few problems blockchain technology could solve in the fintech industry:

1. Relying on the central system

Fintech development solutions provide convenience; however, third parties still control the power. Transactions remain under the supervision of higher-up authorities, and customers are waiting for confirmation.

This is the first issue that blockchain technology has solved in Fintech.

2. It is impossible to trust anyone.

The users usually need to be made aware of what's happening on the other side whenever they take action using fintech apps. This creates confusion and increases anxiety about identity theft, which eventually reduces confidence.

This issue with Fintech could be solved through blockchain-based solutions. The characteristics of its Blockchain transparency, immutability, and transparency are the main characteristics of blockchain technology.

3. Processes are slower

Fintech also requires a blockchain platform since the involvement of third parties can impede processes. This can lead to lower satisfaction and instability in the business economy.

4. Costs of operations are more expensive

It's all about time within the Fintech market. Blockchain technology is a Fintech trend that helps reduce the dependence on multiple parties, making the process easier and shortening the time needed.

You may have caught an idea of the importance of blockchain networks in finance from the prior section. We will now look at the implications of decentralized financial technology (Defi).

Also Read : 10 Best Fintech Apps to Use in 2024

It is the Fintech Industry is Reviving with Blockchain Platform

The most effective way to comprehend and evaluate the effects of blockchain tech on fintech technology is by focusing on areas of economic importance. We'll now look at the subparts.

1. Payments from banks and P2P

In most banks, there is a lot of indeterminate bureaucracy and incompetence that could be more imprudent. This is especially true in the clearing and settlement areas.

These gaps arise from how banking operates and the fact that it is involved at different layers of hierarchy. There is a way to eliminate these gaps by establishing a decentralized system that uses different consensus algorithms for speedier transactions. This lets you utilize blockchain technology in financial services.

Accenture believes blockchain software development can save the world's largest investment bank around 10 billion dollars by allowing it to be used in settlement and clearing banking. The Australian Securities Exchange is thought to have already an initiative to share post-trade settlement, clear, ring, and settlement services in a Blockchain system.

Banks are aware of the real advantages of blockchain technology in the field of finance (using digital currency instead of conventional ones),like speedier transaction times, reduced cost of transactions, and so on. Financial institutions across the globe are being encouraged to explore the possibility of switching to digital currencies and the possibilities of fintech solutions.

The current system of payment could be more efficient, too. This is why it is necessary to find a new way of paying. Cryptocurrencies might be a solution.

Three primary financial services are available today: international money transfer and online payments, credit card transactions, and international payments.

The credit card was invented before the introduction of the internet. Therefore, it was created to make physical payments, not online payments. The significant issues with online credit card transactions are excessive processing charges and security, fraud, and other issues. These issues can be quickly resolved using Blockchain banking and other financial services.

The international payment system is in its beginnings. The system is a closed and regulated system that is compartmentalized. International payments may take more than one day and cannot be completed during regular hours of operation. Your payment will go through multiple banks, each with its processes, before reaching its final destination. This can increase the amount of work required to cross-check information. This is where the cryptocurrency is valuable.

Companies developing blockchain products are working to integrate technology into financial technology and banking. This resolves the issue of ensuring that data is checked across different organizations involved in international money transfers.

Ultimately, banks will be accessible to people who aren't banked. The decentralized ledger system will permit people who can't open bank accounts to use banking services on their phones. McKinsey states that approximately 2.5 billion people need help to access banking facilities. This is close to half the world's adult population. A large portion of them have smartphones. Smartphones are great for making and receiving live pay and for access to microcredit.

2. Trading finance, trade transactions, and Trade Finance

Trade finance is still based on circulating paper across the globe to confirm data. The documents continue to be faxed and posted. Share purchase transactions and stock purchases still require a lengthy clearing brokerage and settlement procedure. Settlement typically lasts three days, but extending this timeframe to weekends is possible because each trader has to maintain their database of transaction-related documents. Additionally, they must constantly compare these databases to ensure greater precision.

Blockchain tech can easily be integrated into financial services, allowing traders to avoid heavy counterparty checks and streamline the process. This lowers, speeds up the settlement process and increases the accuracy of trades.

3. Crypto lending

The financial industry has adopted crypto lending as a fair and effective method of lending money. The borrower can use their crypto assets to obtain an unsecured fiat-based or stablecoin loan, and lenders supply the necessary assets for the loan at a set interest rate. This can also be done in reverse. Some borrowers use their fiat or stable coins as collateral for obtaining crypto assets.

4. Conformity to the rules

This is an excellent illustration of the use of Blockchain in the fintech industry.

Fintech companies are using Blockchain to increase compliance with regulations, as the need for services regulating the public is predicted to grow soon. Blockchain technology can be used to record every verified transaction and keep track of all actions performed by those involved. This technology allows regulators to look at the original documents only and the original documents, not duplicate copies.

The immutability of blockchain technology can also help reduce the possibility of mistakes, ensure the accuracy of audit and financial report records, and reduce the expense and time involved in auditing and accounting.

5. Digital identity

There's a growing number of fake accounts. Even though banks conduct strict KYC/AML checks, they're not 100% secure. Secure banks that are not hacked are more secure because clients have to provide no standard form of documentation to prove their identity.

Blockchain can be used to establish an electronic identity system. Customers can be validated at one time and later use them to conduct transactions anywhere around the globe. Blockchain is also a great tool to help users of financial services.

  • Control identity data

  • Sharing information with others is possible without safety risks.

  • You can sign digital documents like transactions and claims.

6. Auditing

This procedure examines accounts and points out contradictions. It's complex and takes a long time. Blockchain technology makes the process simpler. Using the technology to get your companion to join the data to the ledger is possible. This will help make updating and looking at the data more straightforward.

7. New models for crowdfunding

Crowdfunding can be a method used to raise money. It involves asking large amounts of people for a small amount of money via the internet. The crowdfunding process is simple and more efficient than traditional funding models because of ICO, IEO, and other strategies. This is why ICOs have performed better than the VC funding model.

You might be curious about what the future has in store for blockchain and fintech applications. You'll eventually be able to follow the correct steps. It is crucial to know how fintech companies use blockchain management to improve your outcomes.

Let's discuss a few advantages of blockchain technology in Fintech.

What Are the Benefits of Blockchain in Finance?