How the blockchain is changing financial services?
Blockchain will significantly simplify the global financial system. Many of the processes will be made automatic, intermediaries in most forms will be a thing of the past, the risks of fraud will become close to “zero”. In other words, most financial services will take on a new form.
Payments and transfers
As you know, payment or transfer usually takes a few days. And even if the money transfer occurs much faster, not only banks, but also a modern payment platform spend a decent amount of time processing transactions. All this is necessary in order to prevent double withdrawals, or other problems. The financial institution acts as a trusted third party, ensuring the reliability of the transaction, and takes a commission for it. Blockchain, in its essence, is a trusted third party. Only its work is automated, that is, it does not require human intervention. For the end user that means we get a minimum commission and a zero probability of error (no human factor). For financial institutions — cost savings. For example, McKinsey analysts believe that savings for the sector will amount to $ 110 billion.
How will this affect the industry? At the B2C level, the audience of financial services will expand. For a significant part of the world’s population today they are simply inaccessible. Thus, several international payment systems have already announced that they will use blockchain, which will operate without commission.
In the B2B sector, the transaction time will be significantly reduced. Today, especially between large companies, the preparation for the transaction can last for several months.
Lending
Getting a loan is either long or expensive. That is what we used to believe. In the first case, we are talking about the work of the bank, which involves long approval times. In the second case –microfinance institutions that give out loans quickly, but with a very large interest rates (500–1000% per annum).
There is no need for an intermediary when lending on the blockchain: neither a Bank nor a microfinance organization. The loan is automatically issued through the system directly. This minimizes costs and, accordingly, creates more attractive conditions for the borrower. The blockchain acts as a trusted third party for the investor, who also does not need to pay a commission to the third party.
This is how our platform — SHIFT.cash, which deals with loans secured by car titles, works. By placing the system on the blockchain, we optimize the conditions for borrowers and investors. SHIFT.cash will be the first platform of its kind at the international level. That is, the investor and the borrower can be located in different countries of the world. Such an advance became possible only thanks to the blockchain; otherwise, investors would hardly take such a step, fearing possible risks. Now we are forming a global financial system, the scaling of which will only improve the conditions of investments and loans.
Accounting and auditing
Financial accounting of companies — a very long and therefore expensive service. In fact, the traditional form of this multi-billion dollar sector has come to an end. Just with the introduction of blockchain, the need for it as in a massive analytical layer will disappear. The financial information recorded on the blockchain will be stored in the system unchanged, ensuring full transparency. The process of audit will be carried in real time. In addition, the availability of financial information of companies will increase for the relevant regulatory authorities.
Insurance
Here, as in the previous paragraph, the main breakthrough is openness of information. Greater transparency will make it possible to accurately assess the risks of an asset and create more targeted insurance terms.
