Blockchain Technology is Causing a Paradigm in Fintech and Payment Processing
The Fintech industry has seen the most disruption of blockchain technology. One of the primary reasons for the relative adoption of the technology in this area is due to the promise of the trustless transaction. Hence some major banks and financial institutions are already involved in some serious exploration.
Transactions on the blockchain are transparent and immutable; this relays the benefit of secure tamper-proof records of asset transfers.
An unclean system
The present banking system is littered with numerous cases of fraud and corruption which is aided by the possibility of making transactions untraceable. Unlike centralized systems where processes can be manipulated or deliberately avoided to achieve selfish unholy benefits, the Decentralized Ledger Technology (DLT) by using the blockchain creates complete records, with copies, held on multiple computers, efficiently preventing the records from being altered. By implementing DLTs, transactions can be traced no matter how long or complicated they appear.
Besides tackling fraud and corrupt practices, blockchain technology offers several other benefits especially in the areas of payment processing.
A payment processor is a company that authorizes payments on behalf of individuals to organizations. Typically, companies like inters-witch processes credit card transactions and a company get paid minus the processing fee shared between credit card companies like Visa or Mastercard and the processor. Despite the relative efficiency of these existing systems, the fact that the main parties involved who are peers at both ends of the transaction do not have control over the process makes it quite vulnerable to any form of manipulation and risk. Also, these services are not offered for free by the processors as maintenance fees and other service charges do exist.
Blockchain brings to light the viability of peer-to-peer transactions that ride on the back of the inherent characteristics of the novel technology. Because of its decentralized nature, power and control do not lie in the hands of an administrator or service provider as is the case with centralized platforms. The technology allows the transaction to happen between parties in a system that is known as a peer-to-peer transaction. In the blockchain, this form of transaction it transparent, trusted and immutable. Also, the fees charged during a transaction (for cases where they apply) are highly minimized. These benefits are some of the motivational elements that are enhancing the growth of blockchain tech and making it find application in several ways.
JPMorgan Chase & Co (JPM.N) announced in October that it launched a new payment processing network that uses blockchain technology, in partnership with Royal Bank of Canada (RY.TO) and Australia and New Zealand Banking Group (ANZ.AX). The bank anticipates applying the Interbank Information Network in handling payments to enable them to reach beneficiaries faster with fewer steps and better security.
This is just one example of the numerous entities that are gradually adopting blockchain tech based on their peculiar needs, especially in payment processing.
The remittance sector is also an area where blockchain is significantly disrupting payment processing.
This is a favorite sector due to the global need of sending money across different parts of the world.
A definite trend is developing
Traditional remittances like the Western Union are becoming infamous due to their relatively high charges to send money across the globe.
This is an issue that is likely to go out of fashion shortly as the adoption of blockchain technology improves. Blockchain peer-to-peer transactions are instant, secure and cheap (sometimes feeless). Therefore, the impact of the blockchain is expected to increase exponentially with adoption.
Ultimately, the trend is continuing, and the disruption that blockchain technology brings to the Fintech and payment processing cannot be over-emphasized. Therefore, anticipating a paradigm shift and aligning appropriately with developing events will indeed remain a smart move both for individuals and organizations.