Blockchain is set to disrupt the world’s financial sector! In a nutshell, the technology is ready to allow faster, and more cost-effective processing of financial transactions through a decentralised, distributed ledger that gives everyone using it, autonomy and security. However, most blockchain discussions nowadays tend to be around bitcoin, even though the technology is a lot bigger than a cryptocurrency. As Patrick M Byrne said in 2015, “the main event isn’t bitcoin. It’s using the blockchain to disrupt other industries and Wall Street”. The blockchain innovation is destined to make three major changes in the financial sector: payment and cross-border transactions; trade finance; and managing personal finances.
Payments and cross-border transactions have always been a slow and expensive process. Blockchain changes that, as it allows near real-time point-to-point transfer of funds. This will also mean increased profitability due to less operational costs and over-heads. This will have major institutional and political implications for un-banked populations in unstable economies.
Utilising blockchain technology allows for greater trade accuracy, and a shorter settlement process. Today, we have commercial banks, payment institutions like Swift, investment banks, hedge funds, private equity and a host of others, that carry out various functions like providing businesses with access to capital, underwrite deals, hold deposits, lend money, confirm transactions both for debit and credit cards, and exchanges, etc. And not only is it difficult to trust anyone of them, the costs are usually high. However, with the application of blockchain in the financial sector and an impact on share trading, the world would have a technologically advanced system in place that stores records of every transaction with everyone in the framework that is cryptographically secured. Blockchain will solve identity management issues and the smart contracts will streamline the process. Blockchain can also improve real-time visibility of the transaction to institute regulatory and customs oversight.
Lastly, blockchain innovation would mean a revolution in fin-tech in terms of managing personal finances. Since long people have been using paperless banking with the advent of credit and debit cards as well as online money transfers via PayPal and similar companies. However, blockchain technology could bring together all personal assets ranging from traditional money to gold to cryptocurrencies all in one place allowing users to make domestic payments and cross-border transactions with gold or cryptocurrency as well as any fiat currency they own. The transparency and traceability of transactions makes them secure and the possibilities are endless!
To say the least, it isn’t just the financial sector that blockchain technology could transform, as the technology could be used in various other sectors that work with updatable data that needs to be secured and trusted.
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