Cryptocurrencies, especially Bitcoin is making great strides, leaving many curious about its underlying technology. For those religiously following the cryptocurrency sphere must have discovered the contribution of Blockchain in securing the transactions.
The Blockchain wave is disrupting almost every industry, right from healthcare to retail to fintech. However, people could still relate to its potential and use cases in fintech world, for being introduced through a digital currency.
If the proficiency of Blockchain has to be highlighted, it lies in maintaining data integrity, saving data from tampering, and at the same time, ensuring that data is available to its users, all the time. Considering this, it is possible to find use cases of Blockchain in the fintech world. In the following segment, we take a look at how.
1. Reducing Effects of Cyber Fraudulent Cases
Financial intermediaries like stock exchange, money transfer services, and even banks are suffer from economic fraudulent cases. One of the common reasons for this is centralized database, which is vulnerable to cyber attack, leading to destruction of entire database. Once there is access to one system, hackers get a key to another security breach, leading to more loss and security failure.
Against this model, Blockchain is a distributed ledger, wherein data is decentralized, stored in blocks, and each block holds a timestamp (a cryptographic hash function). Each block contains link to previous block’s hash, thereby creating a chain of records that cannot be falsified. Such a model would require access to multiple blocks for breaching the security system, thereby reducing the damage caused to the financial institutions.
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2. Simplified Customer Identification Service
According to Thomson Reuters, financial institutions spend somewhere around 500 million USD to keep with with Know your Customer (KYC). The current approach to customer identification by various financial institutions involves a number of steps, which impacts the business.
Blockchain can help to reduce the cost and labour involved in KYC verification via cross-institution client verification. This way, customers will be able to manage their digital identity and the financial institutions can access and validate it easily. With Blockchain, independent verification can be enabled, wherein, a client verified by one organization can be accessed by other organization, ensuring that KYC don’t need to start over again.
3. Faster, Secure Payments Processing
Blockchain can revolutionize the current system of payments, by enabling higher security and lowering down the cost of processing payments, which can take place between organization-client or between banks.
Due to a number of intermediaries involved, international transactions between banks may take days for completion. Cross-border payments platforms that are powered by Blockchain makes the payment network more efficient and less time consuming. Take an example of how Blockchain backed Ripple in making global payments, simpler.
Fintech Apps Backed with Blockchain Technology
Blockchain is an underlying technology of various real-time, fast, and secure fintech applications. Blockchain application development has taken a steep rise in the recent past, considering the plethora of benefits that this technology offers. For applications utilizing Blockchain , have free consultation with our technology experts.