Blockchain Solutions for Financial Services
When the cryptocurrency fad first hit the financial services arena, the premise of the innovation was based on bypassing banks and other regulatory authorities by creating a financial system where a centralized body could no longer hold influence or control. Fortunately, Blockchain technology, which is the underlying principle behind cryptocurrency has emerged as a boon rather than a bane for the financial services sector by presenting numerous solutions to enhance transparency, efficiency, and speed.
Contract Processing between B2Bs
When two contracting entities seek to enter into an agreement, banks are often tied with the responsibility of acting as an intermediary. Whether it is for guaranteeing a loan, providing escrow services or safeguarding confidential data related to the contract, the bank must prepare several documents and initiate numerous verifications before finalizing a deal. Blockchain technology can be utilized to make this process more seamless by storing information in digital "lockers" as it would enable relevant parties to collaborate more efficiently.
Maintaining Regulatory Compliance
The financial industry is governed by a range of compliance mechanisms and regulations to safeguard the interests of all stakeholders. Some of these requirements are that of KYC/AML who have been prepared to combat instances of money laundering and protect customers against malicious attacks. The series of processes and initiatives which banks must undertake to maintain compliance are time-consuming, and a failure to implement them successfully can lead to hefty penalties. Blockchain solutions support the automation of compliance processes by providing secure and transparent document storage with easy retrieval to assist regulators and auditors.
Changing Trade Finance
One of the critical challenges in trade finance is siloed data which is tricky to verify and poses a range of audit and compliance risks. Apart from this, the presence of complex manual processes is yet another barrier to developing a transparent system. The presence of such outdated systems also limit the financing prospects which are available to SMEs. With the introduction of Blockchain technology actors in the trade finance sector can benefit from becoming a part of an ecosystem which integrates organizations and banks to transmit KYC and other data safely. This collaborative effort can create opportunities for SMEs to secure faster growth and benefit from an expansion of their operations.
Simplification of Cross-Border Payments
Making cross-border payments have traditionally been a long-drawn and complicated process. The distributed ledger technology of Blockchain simplifies this mechanism by eliminating intermediaries and third-parties. The benefit of cryptocurrencies have become increasingly evident in an era of innovation, despite the skepticism which prevailed in earlier in the market about this technology, analysts are confident that virtual currency can continue to exist without destabilizing the economy and benefit both individuals and entities.
FinTech and the Promise of Blockchain
The financial services industry has been marked with issues related to fraud, lack of compliance and the negative influence of central authorities. As FinTech start-ups continue to emerge in the industry and banks become more open to accepting the promise of Blockchain, the solutions led by this innovation can undoubtedly shape the future of finance.