Blockchain for Financial Services - New Business Model to Streamline Sales Processes
In this modern world, chances are you must have at least heard of Cloud Computing, if not used it unknowingly. Cloud Computing is often referred to as internet-based computing, as the user can access their data anywhere, anytime, with internet access, instead of their computer's hard drive. A few examples of Cloud Computing are Amazon Web Services, Microsoft Azure, Google Cloud, Salesforce, and such applications. But what exactly are cloud computing resources? While the examples gave you some idea of what they do, Do you not wish to understand what else they offer, their characteristics that are considered essential?
Blockchain for Financial Services - Introduction
Blockchain is revolutionizing how businesses function across multiple industries, and the financial industry is no exception. Blockchain technology has become the biggest accelerator in crafting security for several services like asset management, banking, the stock market, and insurance. With its secure and decentralized system, Blockchain has the great potential to transform traditional sales processes, making them more efficient and streamlined.
In this blog post, we will explore how Blockchain can be used as a new business model to streamline sales processes in the financial services industry.
How Blockchain Works: And What It Means For the Financial Industry
To start, let's understand the concept of Blockchain and its operational mechanism
Blockchain technology is a distributed, decentralized, and digital ledger technology that enables transparent and secure transfer and recording of data or information without a central intermediary or authority. Because of its extraordinary properties and design, Blockchain is transparent, secure, and nearly impossible to change. They can potentially revolutionize industries by reducing fraud, enhancing transparency, and streamlining processes.
This technology has numerous applications in the financial sector, including transparent and secure transactions, improved customer verification and identification, efficient payment processing, fraud reduction, simplified supply chain management, and streamlined regulatory compliance.
Now, let's look at how Blockchain can modernize and streamline sales processes in the financial services sector.
The financial services industry is projected to hit 2.6 Trillion U.S. dollars by 2022. The international financial system deals with trillions of dollars daily and serves billions of folks. With such heights come several challenges that financial institutions have been facing for a long time.
One of the biggest challenges financial industries face is the time-consuming and intricate nature of sales processes. From product selection to execution and pricing, the complete sales process can be a scary and daunting task that involves numerous manual processes with multiple stakeholders. It results in inefficiencies and increases the risk of fraud and errors. Blockchain can address such challenges by providing a transparent, secure, decentralized sales procedure platform.
Blockchain Use in Financial and Banking Services Market Size
According to Statista- The overall blockchain services market size for banking and the financial system was estimated at 0.28 billion U.S.D. in 2018. The multitude of applications of blockchain for financial services is estimated to develop further in the next decades, hitting a market size of approximately 22.5 billion U.S.U.S.D. in 2026.
Blockchain usage in the banking & financial services market size globally in 2018 & 2019, with a prediction to the year 2026 (in billion U.S. dollars)
Benefits of Blockchain in Finance Include:
Security: The decentralized nature of Blockchain makes it extra safe and secure as there is no central point of failure or control, making it hard for cybercriminals to attack.
Transparency: Blockchain's immutable and transparent nature allows all parties involved in a transaction to have an accurate and complete view of the transaction history.
Efficiency: By reducing the need for manual paperwork and intervention, Blockchain streamlines the financial transaction procedure, reducing errors and increasing efficiency.
Fraud prevention: The decentralized nature of Blockchain can significantly reduce the threat of fraud and enhance the security of financial transactions.
Traceability: Blockchain can be particularly useful in industries where traceability is significant, such as supply chain management.
Innovation: Blockchain for business processes, as well as innovative products, can be formed that weren't possible before. It can cause increased innovation and competition in the industry, eventually benefiting consumers.
Save costs: According to a study, D.L.T. (Distributed Ledger Technology) can reduce the cost of financial services infrastructure by up to $ 15 Billion – $ 20 Billion annually by 2022. Blockchain technology is a part of D.L.T., which can help enhance transparency and lessen expenses while guaranteeing security.
Financial service providers such as banks can also execute smart contracts in their systems to lessen the costs of:
Therefore, Blockchain in financial solutions can considerably save costs.
How Can Blockchain Technology Be Utilized in the Field of Finance?
Some of the use cases of Blockchain in financial solutions are:
1. Financial Record Keeping
2. Fund Investment
3. Cross-Border Payments
4. Credit Score
5. Lending Platforms
6. Government Expenses
7. Invoice Management and Billing Solution
8. Political Funds
9. Initial Public Offering (I.P.O.)
10. Stock Exchange
Besides use cases, Blockchain can offer high-end transparency and security to sales processes. With its permanent and tamper-proof records, Blockchain can lessen the risk of errors and fraud while providing higher transparency to clients. It can help build confidence and trust in financial institutions, resulting in customer loyalty and increased business.
Future of Blockchain in the Finance Industry
The impact of blockchain technology on the financial sector could significantly influence it. Here are some potential developments:
Increased adoption: This cutting-edge technology is becoming widely accepted as a viable solution for financial transactions. As more financial institutions and companies adopt blockchain technology, it is likely to become a standard trait of financial infrastructure.
Expansion beyond cryptocurrencies: Even though blockchain technology was first used for cryptocurrencies, it has the extraordinary potential to be used for an extensive range of financial apps, such as insurance, asset management, and supply chain finance.
The Emergence of new business models: Blockchain can disrupt traditional business models by enabling new, decentralized models of operation that are more efficient and cost-effective.
Adoption of decentralized finance (DeFi) protocols- Acceptance of decentralized finance (DeFi) protocols, which aim to shape financial technology on top of blockchain networks, offering users higher control and access to financial solutions.
Rise of central bank digital currencies (C.B.D.C.s) - Emergence of C.B.D.C.s that leverage Blockchain to give a digital form of fiat currency, allowing speedy and highly efficient payments and transactions.
Overall, Blockchain's future in finance will likely see a constant expansion of blockchain-centric products and solutions, as well as improved collaboration between blockchain startups and traditional financial institutions.
What are the Challenges of Blockchain in Finance?
However, there are still some noteworthy challenges to overcome.
Relatively New: Blockchain is still in its development stage. It has various hurdles to overcome with ongoing modifications.
Differing Methodology: After the implementation of Blockchain, enterprises will have to restructure their methodology to ensure there is no necessity for data alteration.
Lack of Interoperability: Blockchains can't make use of and exchange information from other blockchains. Therefore, there is no communication between them. Blockchain networks need to concentrate on the advancement of interoperability solutions.
Affordability: Shifting to blockchain technology is an expensive affair. Hence, smaller financial companies might want to avoid investing along with the overhauling structures already in place.
Complexity: Blockchain can be difficult and complex to understand, making it perplexing for financial institutions to accept and implement.
Nonetheless, the potential rewards of blockchain technology in the finance sector are too great to ignore, and we can expect sustained innovation and growth in this space.
Blockchain for financial services is moving towards acceptance of Blockchain. It's a great innovation that has revolutionized the international financial system and made it more efficient and secure. There are countless ways blockchain technology enhances the financial service industry. Its biggest advantage is "cross-border settlements that create a global network through Blockchain that is extremely lucrative and transparent simultaneously. As technology grows, it will become a progressively significant part of the industry.