Fintech is the power of Banking and Finance mechanisms…Blockchain is here to empower Fintech
The world runs on finance, and fintech is the revolution for managing and digitizing banking and financial services. It has disrupted the conventional financial services and has increased opportunities worldwide. It monitors the hazards related to innovation in this domain. Secure and transparent transactions are the basic requisites when it comes to finance.
Even with the digitization of the finance management, there occur many challenging scenarios that need to be addressed on high priority. Blockchain helps do that.
Blockchain in Fintech is here to provide a system more secure, reliable, seamless and robust. That’s a win-win for both, the end customers and the banks and financial institutions.
Some of the major Issues in FinTech sector in the conventional system
Centralized Data Control
Majorly, in many of the systems, the operations are controlled centrally by a third party entrant, and are prone to the risk of data loss and counterfeiting of data. Also,managing the centralized data is complex.
Counterfeiting with customer identification
Customer Identification and related details, KYC, are not completely safe in the conventional systems. Also, all the authorized organizations hold a different copy, physical or digital which leads to redundancy. Counterfeiting can be a major risk here.
The audits are cumbersome and may lead to multiple audit trails sometimes.This ultimately incurs unnecessary cost and time, making the system unreliable.
Time consuming processes
A centralized system needs authentication of processes through the central system every time. This takes time to verify the transactions and execute consuming unnecessary time.
Risky and costly financial transfers
Payment details are highly ocnfidential.Financial transfer from the payment gateways can lead to the risk of delay and data hacking. Moreover, a cost is surely incurred on hiring these third party gateways.
Partners involved in Smart Contract for FinTech
Smart contract partners for fintech would include the digital asset and payment services, connected insurance sectors, banking services and organisations, private and public financial domains and other related industries. Smart contracts would generate a highly reliable system. The accuracy in the system would enhance the authentication and verification of transactions across the globe.
How Blockchain can help overcome the issues and improvise the system
A third party document management system always comes with a cost. Moreover, the physical and digital documents carry a risk of copying or altering the contents. Blockchain allows easier data management, that is immutable and safe.
Authentic Payment services
The encrypted distributed ledgers on the blockchain enables, secure, speedy and a low cost payment services at hand. The authenticity of the payment services is one of the major advantages of Blockchain for fintech.
KYC Authentication and Verification
KYC utility must be the ideal, identification generation of the customers, accessible throughout the globe. With keen authentication and verification procedures that the blockchain offers, the KYC can be generated once and available to everyone in the smart contract, anytime.
Simplified Remittance and Reconciliations
High fees and delayed transactions issues faced by remittance industries would no longer exist with the blockchain based system. The elimination of dependency on middlemen would help achieve that.
The sharing of distributed ledger by all the parties in the blockchain could definitely speed up the transactional operations. Ex. transfer of funds or dispensing of cash wouldn’t need the mechanism of approval and verification from one bank to another, as both the banks in transaction would have the same copy to refer to, instantly.
Transparent and immutable data would lead to non alteration of the same, leading to a declined need of redundant audit trail management.
Secure Digital Insurance
Claims processing through smart contracts and managing digital assets would become way easier with the help of blockchain. More of all, the insurance deals will be highly secure unlike before.