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5 ways blockchain is disrupting fintech

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In just a couple short years, blockchain has gone from a vague financial concept associated with Bitcoin to the talk of the financial world. According to the 2017 PWC report, 77 percent of the financial services industry expect to be using blockchain by 2020. As it becomes more widely understood and businesses continue to find more and more ways to use blockchain to improve productivity, transparency, and efficiency, its impact on the fintech industry is becoming hard to ignore. Here are five areas where blockchain is changing the status quo:

  1. Clearing and settlement

Blockchain’s core concept of decentralization offers streamlined processing and far greater efficiency than current back-office systems. Companies specializing in blockchain implementation are helping to replace traditional registries, clearing, and settlement bureaucracy with blockchain technology, figuring to save the financial industry billions in transaction costs and office labor. While digital trades take place immediately, there is still a significant time lag involved in the movement of most assets. Blockchain can eliminate this, save money, and ultimately lower the costs on both ends.

      2.  Asset management

While some assets are straightforward to trade and track, there is a substantial portion of traded financial assets that does not lend itself to an easy division or transfer. The complex processes necessary to enable these trades and to accurately monitor their movements can be both expensive and time-consuming. Blockchain technology allows for much simpler division of assets, making them more accessible to a far larger portion of the industry and removing barriers to trade.

      3.  Cyber crime

Many feel that blockchain will have the greatest impact on protection from fraud and cyber attacks. By providing a decentralized network for fintech companies to securely transfer large amounts of information, it significantly changes the landscape for hackers and data breaches. Blockchain’s unmatched transparency makes it extremely difficult to penetrate or influence secure databases undetected. It is this potential for increased security and greater public confidence that has many fintech companies most excited about its potential.

     4.  Identity tracking

One of the most tiresome and labor-intense tasks faced by financial organizations is the tracking and verification of client identities. The “Know Your Client” aspect of the financial industry remains somewhat archaic and is frequently plagued by inaccuracies and inefficiencies. Blockchain allows for the streamlining of this process through instant verification methods that could be available to all relevant members of the financial community, eliminating huge amounts of paperwork and data transfer.

     5.  Property purchases

The development of smart contracts to process land and other property transactions are only just starting to take place within the industry. These self-executing processes can provide instantaneous closing using fully secure data which should greatly reduce overall expenses and fees. In time, mortgage processes should become much faster and more transparent, and if land registries are transferred to blockchain platforms the entire process could eventually require just a fraction of the time and money involved today. In fact, the same benefits could apply to any type of investment, including private equity and crowd-funding, which would become exponentially more efficient using digital contracts as opposed to physical ones.

At this point, there is no debating blockchain’s vast potential to change fintech for the better. No one is arguing against its ability to offer greater security, increased efficiency, and unparalleled transparency. The only issues are global standardization – something that always involves time and a degree of complexity – and legal ramifications. While governments in the developed world recognize the inevitability of blockchain technology, it is going to take time to integrate it into the existing financial systems. However, as progress continues, blockchain’s impact will continue to grow.

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