How Blockchain Technology Is Revolutionizing Fintech in 2022

Blockchain is a robust and secure technology that every business wants to embrace in 2022. It provides benefits like decentralization, cryptographic security, immutability, and tokenization.

Built In states that companies like BurstIQ, Filament (IoT), and HYPR (IoT) widely use blockchain solutions like smart contracts and decentralization.

The banking sector requires security in financial operations that blockchain technology has proven to provide effectively.

Traditional businesses can also use blockchain technology to assure data integrity and top-tier security measures.

Blockchain is a distributed ledger technology in the financial industry that simplifies regular and business payments, and fraud prevention, and removes third parties from transactions.

Blockchain integration into financial operations gives Fintech companies a futuristic advantage over the competition.

And according to Statista, the value of global blockchain technology may reach $39 billion by 2025.

Let’s delve a little deeper into the concept of blockchain technology.

What is Blockchain

Blockchain is a decentralized digital ledger that utilizes a single-source-of-truth concept to store, encrypt, and connect data blocks. It improves security and creates a digital ledger for every transaction.

Blockchain technology plays a significant role in cryptocurrency operations. It supports cryptocurrencies like Bitcoin, Ethereum, and Tether.

Blockchain’s Contribution to the FinTech Industry

1. Secure Payments

Organizational and digital consumer security is a global concern.

Several thefts and breaches have made stakeholders appreciate the value of secure payment methods and transactions.

Blockchain has a solution for such intricate problems.

The blockchain contains infinite numbers of immutable blocks generated using safe and secure protocols. They prevent unauthorized changes from disrupting the whole chain.

Blockchain technology can completely transform the payment industry by securing its many weak points. It has procedures that demonstrate transparency and increase the overall efficiency of financial transactions.

Blockchain helps regular people and businesses manage their money in a secure and convenient manner. Its decentralized operations also remove the need for third parties in transactions. Third-party transactions are often prone to fraud.

2. Trade Finance

Blockchain is essential in the financial operations connected to domestic and international trade. It can liberate traders from time-consuming inspections. And it offers simplified cross-border trade, transparent pricing, and quick payment processing.

Companies can use blockchain technology to improve transaction accuracy, speed up the settlement process, and eliminate risks.

There is a lot of paperwork and complexity in the trade financing arena. Purchases of stock and shares must go through brokers, exchanges, clearing, and settlement.

Blockchain role in the stock lifecycle:

• Cut out multiple intermediaries to make the process easier.
• Protect the stock exchange network by keeping immutable data records.
• Close stock cycle loopholes by making the process entirely transparent.

3. Bank Avoidance

Banks and financial institutions often impose inconvenient restrictions in the financial sector. It can make things difficult for both regular people and businesses.

Blockchain helps people manage their money and transactions without the intervention of a bank or a regulator. It also simplifies digital transactions for the owners of cryptocurrencies like Bitcoin and Ethereum.

4. Smart Contracts

Smart Contracts are contracts secured with code that runs only when the user/consumer meets its agreed-upon criteria.

It adds integrity to the network chain with the auto-implementation capability. The loan department is an easy-to-understand use case for smart contracts.

Assume a customer takes a loan from a financial company. The firm can create a smart contract with predetermined interest rates, terms, and conditions.

The smart contract will automatically activate if the consumer fails to meet these predetermined requirements.

Smart contracts lead to accuracy of the information, better security, and clear communication in all financial operations.

5. Digital Identity Verification

Blockchain provides a digital verification system. It helps users select how they identify themselves and reveal their identity only to trusted individuals.

Clients that utilize this method need to go through validation once. And they may use this confirmed identification document to make transactions anywhere in the world.

Users can securely transmit payments or data using their private keys once completing the registration procedure. End-users may control their digital identities using Blockchain.

It removes the risks associated with transferring money to the wrong individual. End-users will never have to worry about who is on the other end of the line.

Clients can use a blockchain to:

• Manage their personal identity information and reputation.
• Share their info with others without fear of risking their safety.
• Log in to digital services that do not require passwords.
• Sign documents like claims and transactions digitally.

6. Cyber Fraud Prevention

Financial markets are particularly prone to fraud. It is due to the usage of a centralized database that modifies the whole database.

Internet banking frauds, computer manipulation, and Mobile banking frauds are some well-known financial frauds. Blockchain can provide a reliable solution to such problems.

Blockchain’s transaction records are not prone to alterations and have end-to-end encryptions. It prevents fraud and suspicious activity in all financial operations.

It stores the decentralized financial data in blocks. And each block has a cryptographic hash function that secures the data.

7. Peer-to-Peer Transfers

Individual customers, startups, and small businesses pay substantial transactional fees for every international transaction.

Customers also send money from their bank or credit card through the internet with P2P transfers.

There are several P2P transfer programs in the market. Some P2P systems demand high charges and are not secure enough to protect personal data.

The Blockchain can reduce such expenses during cross-border transactions. It exists everywhere and has no geographical boundaries. And that’s how it can make P2P transfers inexpensive for many users.

Conclusion

The arrival of blockchain technology will propel the FinTech sector to unprecedented heights. Fraud prevention, exclusion of third parties from transactions, and top-of-the-line security are the primary benefits of blockchain technology. It creates a digital ledger that contains accurate data about all your transaction.

Such accuracy proves highly beneficial in the banking and accounting industry. Time-stamped digital ledgers also protect you from legal problems caused by inaccurate or altered financial data.

Blockchain technology can produce a society in which individuals can manage their money successfully without the need for intermediaries. It can bring a new era of financial responsibility, accountability, and transparency.