Many crypto unicorns have faltered. NFTs, cryptocurrencies, crypto exchanges — these once-heralded technologies now appear on the verge of collapse. And with suspicions rising around crypto, unfortunately, that means blockchain’s reputation is tarnished.
However, beyond its usage in crypto, blockchain technology is holding its value and proving to be a potential game changer for fintech. Whether for its ability to streamline value-chain use cases, reduce costs and settlement times for money transfers, or innovate in securing inter-organizational document sharing, blockchain is poised to disrupt, innovate, and improve fintech.
Multiple sectors that intersect fintech, such as banking, insurance, personal finance, payments, lending, and wealth management, are all likely to be disrupted by blockchain, where layers of (trusted) intermediaries exist, and core issues of trust between partners cannot be solved by centralized solutions.
For example, money transfers have traditionally relied on trusted intermediaries to maintain auditable ledgers for interbank and international transactions. These types of transactions can take up to three days to settle, involving five or more intermediaries. In addition, fees for international transactions and remittances are incredibly high, and it becomes apparent that this process is time-consuming, costly, and needlessly complex, considering that blockchain technology can remedy these issues.
With blockchain-powered payments, transactions/payments or remittances can be done securely, with much faster processing, and at a lower cost than the conventional methods, regardless of the geographical locations of senders and recipients. Blockchain payments are already supporting multiple currencies, including the U.S. dollar, and it’s clear that by leveraging blockchain technology, costs and settlement times can be drastically reduced.
Highly secure document sharing is another area where blockchain technology can innovate, particularly in the fintech sector. For organizations such as banks and financial institutions, whether it’s for U.S. Securities and Exchange Commission oversight, Financial Industry Regulatory Authority compliance, or Sarbanes-Oxley reporting, maintaining control of financial data is critical.
The need for irrefutable proof that the lineage and integrity of their key documents are sound requires financial service companies to have implicit trust in centralized systems and audit processes, which counter the current trend of using decentralized value chains. It also requires a high degree of security measures as well as the involvement of trusted intermediaries at times.
Document-sharing benefits of blockchain include virtually tamper-proof storage and sharing, complete privacy controls, and security measures that reduce cost and complexity.
Traditional document sharing and verification comes with its own set of challenges, including overhead costs, data storage considerations, fraud or tampering risks, and privacy concerns among them. Blockchain technology can provide a viable alternative solution for cases where verifiable documents must be presented across business entities and national boundaries, such as insurance policies and identity proofs.
However, while selecting a service for this purpose, one must remember to opt for a solution that is flexible enough to leverage different blockchains for future proofing as this space is rapidly maturing. Document-sharing benefits of blockchain include virtually tamper-proof storage and sharing, complete privacy controls, and security measures that reduce cost and complexity. These features make blockchain document sharing highly valuable for financial institutions and organizations.
Blockchain technology is ready for its fintech moment beyond crypto.
Amrit Jassal is the chief technology officer and co-founder of Egnyte.