Rudy Shoushany is the founder and host of DxTalks: The Digital Transformation talk show and MENA’s digital events. Follow him on Linkedin.
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Blockchain technology is disrupting financial institutions in fundamentally new ways. Instead of replacing what already exists, it creates a whole new market and avenues to bank the unbanked.
Blockchain is creating new financial solutions that scale faster, are cheaper, more secure, and more accessible to the average man on the street. We’ve removed barriers to access financial services, enhanced security, eliminated middlemen, and increased transparency.
Blockchain, once touted as worthless to investors and dubbed an unprintable name by traditional financial institutions, is now at the forefront of mainstream acceptance and popularity in the global financial industry. . Fintech companies are in an arms race to develop the best blockchain platform to support all kinds of transactions in their own context.
Will fintech and blockchain replace traditional financial institutions?
Traditional financial institutions are not going away completely for several reasons. For example, if you want to use your bank account to prevent fraud and theft, there is no better way to do it than with a bank.
Additionally, if you want to store cash, you can store it in any country with a stable currency. This is not possible with blockchain platforms due to the volatility of the cryptocurrency market. And finally, many people are not happy with using cryptocurrencies because they feel that these new currencies have volatile values and will negatively impact their finances in the long run.
However, blockchain will allow traditional financial institutions to cut a significant portion of their costs. This will result in a more cost-effective service aimed at everyday people, not just the upper class.
8 Impacts of Fintech and Blockchain on Financial Institutions
Below are just a few of the impacts Fintech and blockchain will have on financial institutions.
1. Improve service
Blockchain will be able to provide personalized services tailored to specific needs. For example, say you are a trader. Banking platforms should provide real-time monitoring of the performance of digital asset portfolios. In contrast, a person who wants to open a savings account only needs a simple online her banking service.
2. Speed and cost savings
Blockchain technology can save businesses a lot of time and money. If you want to open a small business and pay taxes and other utility bills, you will need to apply for a license. This process is cumbersome and complicated, but financial institutions require information from you (your bank account), which limits the number of businesses that can access this service.
Blockchains, on the other hand, can be programmed to accept information from any source without the need for human intervention, allowing this service to be delivered quickly. This means that any company can apply for a license without missing work.
3. Shift-in control
Human desires are changing and evolving. These growing demands for open and secure financial transactions demonstrate the inability of traditional financial institutions to meet the needs of a growing customer base. The democratization of finance is imminent, and traditional financial institutions will be decentralized by the disruptive power of blockchain. Users own and control their data without intermediaries.
4. Huge size
Blockchains can process more transactions than traditional financial institutions. When it comes to volume, blockchain platforms have what it takes to manage high volumes of transactions without slowing them down, which is a viable competitive advantage. there is no limit. Blockchains do not need to rely on intermediaries to process transactions efficiently.
5. Faster transaction
Financial transactions that were completed in days are completed in seconds on blockchain platforms. This is because blockchain transactions do not require a third party for verification. Rather, they are publicly archived. Requests for one network node are processed immediately by all nodes.
6. Low cost
Blockchain technology can help reduce operating costs for financial institutions. This is because Smarthis contract significantly reduces the required manpower and other associated operating costs. Reducing these overheads can be an effective way to increase profit margins, especially for large banks that already have many customers. The cost savings that blockchain will bring to financial institutions are immeasurable. We offer services that offer superior value at a lower cost than what is currently available in the market.
7. Improved transparency
Blockchain offers greater transparency than traditional financial institutions. For example, if the U.S. Securities and Exchange Commission wanted to trace the origin of insider trading, they could easily do so using blockchain. Comparing this to banks, it is difficult to trace the origin of payments through banks, but blockchain is entirely possible and can be done in just seconds.
8. More Opportunities
Its limitations will greatly increase opportunities and services not offered by traditional financial institutions. For example, investments in the stock market, which require considerable time and money, are not offered because banks cannot process such transactions efficiently enough.
The last word
The rise of blockchain technology is causing a revolution that will help remove some of the limitations of traditional banking. This change will ensure access to financial services for all. That is, disadvantaged countries, countries facing economic problems, and countries that are not financially included may now be financially included.
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