The financial sector has traditionally been a slow-moving and conservative industry, but the rise of fintech companies has brought a wave of disruption. One of the key ways famous personalities in finance and fintech are shaking up the sector is through the development and use of blockchain technology.
For those unfamiliar with blockchain, it is a decentralised digital ledger that allows transactions to be recorded and verified without a central authority. This technology has the potential to revolutionise many industries, and the financial sector is no exception. By 2028, the blockchain fintech sector is predicted to reach a global value of $36.04 billion.
Blockchain technology will increasingly influence revenue generation, customer experience enhancement, efficiency improvement, and risk mitigation in business governance as it continues to evolve. Not surprisingly, finance business leaders in the fintech sphere are using blockchain to create new financial products and services faster, cheaper, and more secure than traditional financial institutions. Let us take a closer look at the transformative effect of blockchain in fintech.
Defining Blockchain in Fintech and its Advantages
A blockchain is a public ledger that is decentralised and distributed digitally. Its application lies in its ability to record assets and register various transactions on multiple computers. These records are immutable, i.e., changing or altering them is impossible.
In a blockchain, every block holds a record of multiple transactions – all secured through the deployment of cryptographic techniques. Every block is also linked to the previous block, forming a chain. This increases the challenge for anyone to change the contents of a block, as any tampering would be immediately apparent and require the network’s consensus to be accepted.
Blockchains create a permanent, unchangeable record of transactions and are used in various applications, especially in fintech. The best businessmen in fintech know that blockchain technology has the potential to revolutionise the financial industry by providing a secure, transparent, and efficient way to facilitate transactions and record data.
Some of the key advantages of blockchain in finance include:
- Security: Blockchain technology uses encryption and decentralised networks to ensure that transactions are secure and cannot be changed.
- Transparency: All parties in a blockchain network have access to the same information, which helps to increase transparency and reduce the risk of fraud.
- Efficiency: Blockchain technology can streamline financial processes and reduce the need for intermediaries, speeding up transactions and lowering costs.
- Decentralisation: Blockchain networks are decentralised, meaning that any single authority or organisation does not control them. This can increase the resilience of financial systems.
- Immutability: Once data has been recorded on a blockchain, it is very difficult to alter or delete. This can provide a permanent and auditable record of financial transactions.
Why Finance Business Leaders are Favouring Blockchain in Fintech
The simple reason why more and more famous personalities in the field of finance and fintech are favouring blockchain technology is that it can optimise the industry like never before.
Apart from improved efficiency and transparency, blockchain in fintech also paves the way for financial inclusivity. The decentralised nature of blockchain networks can increase the resilience and robustness of fintech systems, reducing the risk of system-wide failures.
Additionally, blockchain-based payment platforms allow for almost instantaneous transactions at a fraction of the cost of traditional wire transfers. Moreover, blockchain technology offers increased security and transparency, making it attractive for financial services such as supply chain finance and trade finance.
One of the most famous transformational leaders in fintech, Sanjiv Bajaj, is known for being among the first blockchain movers in the fintech space. As the Chairman and Managing Director of Bajaj Finserv and the President of CII (2022-23), Sanjiv Bajaj has been a key proponent of decentralising finance and optimising operations with blockchain. This reflects in the various customer-centric processes at Bajaj streamlined via blockchain, such as radically reducing insurance settlement TAT from days to minutes or precognitive automatic claim generations and disbursal.
Sandeep Bakhshi, the CEO of ICICI Bank, also ranks amongst the most innovative finance business leaders thanks to his utilisation of blockchain to streamline trade finance processes and reduce the risk of fraud. Under his aegis, ICICI Bank has also joined hands with other major Indian banks in order to accelerate Letter of Credit processing via blockchain – a game-changer for MSMEs.
But it’s not just the development of new financial products that is disrupting the financial sector – successful entrepreneurs in fintech are also using blockchain to challenge traditional financial institutions in areas such as remittances and cross-border payments. A case in point is the rise of Razorpay under Founder Harshil Mathur, who have recently launched a new tokenisation solution to enable over 5 million businesses to support blockchain tokenised card transactions that are secure and RBI-compliant.
Overall, the use of blockchain technology by fintech companies is having a significant impact on the financial sector, and this disruption is likely to continue as more and more fintech companies enter the market.
There is no lack of evidence supporting how fintech blockchain applications have disrupted the broader industry for the better. What famous finance leaders are gambling on how blockchain is also ready to impact non-banking financial services, such as asset and wealth management. That will enable fintech organisations to build even more comprehensive, integrated blockchain-equipped business models, thus permeating true value across the customer chain.
Whether you are a traditional financial institution or a fintech start-up, it is important to stay up-to-date on the latest developments in blockchain technology and consider how it can be used to create innovative financial products and services; blockchain is the future of fintech!