Blockchain & FinTech : Revolutionizing The Financial Industry — Part I

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The term fintech was originally used to describe how computer technology is used in the back office of banks or trading firms. However, it has now come to encompass a wide range of technological interventions in the field of personal and commercial finance.It is possible to apply financial technology to any innovation in the way people transact business, from digital money to double-entry bookkeeping.Blockchain technology is transforming the fintech industry by generating more revenue, improving the end-user experience, enhancing the delivery process, reducing risk, and boosting efficiency. Similarly to any other tech-oriented industry, fintech is in the early stages of its development.

Author: Sophie N. Ngouakang

Described as Fintech, financial technology seeks to improve and automate the delivery and use of financial services through new technologies. With fintech, companies, business owners, and consumers can better manage their economic operations, processes, and lives through the use of specialized software and algorithms on computers and, increasingly, smartphones. The word fintech combines the words “financial technology” and “financial services.”

What is Fintech?

Fintech refers to the integration of technology into offerings by financial services companies in order to improve their use and delivery to consumers. It primarily works by unbundling offerings by such firms and creating new markets for them. Let’s develop our definition of FinTech by describing it in two parts. First, the term refers to businesses who are using technology to operate outside of traditional financial services business models to change how financial services are offered. Second, FinTech includes firms that use technology to improve the competitive advantage of traditional financial services firms by providing faster and more convenient products and services to their customers. The first part of the definition refers to those non-bank technology companies that have entered into the financial services space, while the second part of the definition applies to legacy financial institutions who are deploying and developing innovative new technologies. This definition also implies that FinTech covers the entire range of products and services that have historically been provided by financial services firms.

Fintech Landscape

Some of the most active areas of fintech innovation include or revolve around the following areas (among others):

• Cryptocurrency (Bitcoin, Ethereum, etc.), digital tokens (e.g., NFTs), and digital cash. These rely on blockchain technology, which is a distributed ledger technology (DLT) that maintains records on a network of computers but has no central ledger. Blockchain also allows for so-called smart contracts, which utilize code to automatically execute contracts between parties such as buyers and sellers.
• Open banking, which is a concept that proposes all people should have access to bank data to build applications that create a connected network of financial institutions and third-party providers.
• Insurtech, which seeks to use technology to simplify and streamline the insurance industry.
• Regtech, which seeks to help financial service firms meet industry compliance rules, especially those covering Anti-Money Laundering and Know Your Customer (KYC)protocols which fight fraud.
• Unbanked/underbanked services that seek to serve disadvantaged or low-income individuals who are ignored or underserved by traditional banks or mainstream financial services companies. These applications promote financial inclusion.
• Cybersecurity, with the proliferation of cybercrime and the decentralized storage of data, cybersecurity and fintech are intertwined.

Fintech Users

There are four broad categories of users for fintech:

1. B2B for banks,
2. Their business clients,
3. B2C for small businesses, and
4. Consumers.

With the rise of mobile banking, increased information, data, more accurate analytics, and the decentralization of access, all four groups will have unprecedented opportunities to interact.

Consumers — In terms of consumer awareness and ability to describe fintech, the younger you are, the more likely you are to be aware of it. Since millennials have such a large income (and inheritance) potential and are such a huge part of the economy, consumer-oriented fintech tends to be geared toward them.

Businesses — fintech has changed the way businesses access funding or startup capital. Before fintech, business owners or startups would have resorted to a bank. In order to accept credit card payments, the company must partner with a credit provider and install infrastructure, such as a landline-connected card reader. As a result of mobile technology, these hurdles have been eliminated.

Optimizing fintech with Blockchain

The finance domain, even after being a recipient of multiple technology integrations and advancements, continues to operate as a centralized model — with the center being the financial institutions and governments. While an age-old tradition, financial service users have started doubting its value.

This doubt has given birth to a more transparent solution — Blockchain development services. Blockchain development services help create decentralized software with full traceability and security of data and transactions. The technology has added another dimension to the fintech landscape, the one that has evolved as a tech-based revolution in the financial sector. It has offered the tremendous potential to the fintech industry by bringing significant changes to business models and operating processes.

This has made both startups and financial application development companies show an interest in exploring the need for blockchain in the fintech industry. Something about which we will develop further in the subsequent parts of this article.

In Part II, we will dive deeper into the niche market and look into how blockchain adoption in financial services is changing the complete story.

About the author

Sophie N. Ngouakang is a blockchain enthusiast and a Lawyer, passionate about creating an impact in the world to drive blockchain adoption forward. Her blockchain journey began in the early days of the year 2021. Since then, she has enrolled in multiple empowerment programs in the blockchain ecosystem such as the DLT, NFT, Bitcoin Talent programs. After realizing that many people especially in Africa were struggling with getting an understanding of the blockchain technology, she set forth to found — She’s Techie — a tech -think-tank for the sensitization of Africans, women in particular, on blockchain technology. Get connected to Sophie via LinkedIn | Twitter.