India has emerged as one of the key global fintech hubs and has created huge room for fintech start-ups. Covid-19 accelerated the growth of fintech industry, which now enjoys record investments and skyrocketing adoption of its services. With industries shifting to digital platforms, it was critical for the fintech industry also to move to app-based operations.
The finance sector has come a long way in providing the comfort of having almost all operations at your fingertips, in addition to secured logins and complete access to financial data. While app-based operations reduce the time and effort needed, secured transactions, safety from fraud as well as transparency to safeguard from any misconduct are doubtful. This is where blockchain technology can benefit and even revolutionise the whole tech-based financial ecosystem.
Before going ahead, it is essential to understand what blockchain is and how that technology helps the fintech sector to perform transparency.
What Is Blockchain Technology?
A blockchain is a decentralised, distributed and public digital ledger that records transactions across many computers so that the record cannot be altered, with effect from data in the past, without the alteration of all subsequent blocks and the consensus of the network. This mushrooming technology is growing and making its mark in every field including healthcare, real estate, agriculture, food and especially fintech.
Accelerating The Fintech Revolution
It is now evident that blockchain technology has the capability to transform regular financial processes into entirely transparent procedures built on secure and efficient transactions. The fintech transactions on the block do not require a middleman and is capable of establishing peer-to-peer networks, fast transactions and complete transparency.
With the potential to make the financial services industry more transparent, less susceptible to fraud and cheaper for consumers, blockchain focuses on reducing the risk of financial institutions and providing secure, encrypted data that are safe and unaltered. This helps the industry to focus on machine-driven intelligence and artificial intelligence-powered decision making.
Bankless Financial Management
With increasing new-age customer segment, digital wallets, digital lending and digital payments have created a new market segment. This ecosystem can be well managed by blockchain. Blockchain integrated digital wallets are protected by private keys, while also possessing their very own unique public address which allows them to send and receive payments. With the usage of blockchain technology, wallet holders who have private keys are the sole owners of the assets, unlike traditional currency where banks take the responsibility of holding money.
The Importance Of KYC
Trust and identification have always been a challenge in financial transaction. Blockchain, as a technology, will play a key role in getting the entire manual, paper-based, time-consuming and expensive process of maintaining up-to-date records of customers through digital KYC. Digitisation provides an immense opportunity to maintain accurate information and make transacting on the internet a process with genuine trust between parties. Key segments that make the task easier for everyone are around customer consent, data theft and identity theft.
Blockchain And Borderless Payments
With the market moving towards borderless transactions, financial institutions are able to focus more on the speed and efficiency of payment options. Regulating the resources required to authorise payments and making them convenient for international payments further lowers the total cost of ownership.
Blockchain technology will revolutionise the fintech industry. Fintech has grown to modernise traditional financial institutions and blockchain technology has aced this process. The data privacy advantage of blockchain has been building up the much-needed trust between users and providers in the fintech industry.
With increasing focus on payments, closely followed by securities and trade finance, blockchain will focus on evolving complexity and delivery timeframe, which will improve the operational efficiency of financial institutions.
The author is Chief Technology Officer, EarlySalary
(Disclaimer: Views expressed are the authors’ own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.)