Transform Financial Services Industry Using Blockchain

This is what you need to know about blockchain and its role in financial services.

Blockchain can make financial services more transparent, less prone to fraud, and more affordable for consumers.

Blockchain technology is leading innovation in finance. It promises to reduce fraud, facilitate fast and secure transactions, and help manage risk within interconnected global financial systems.

Blockchain does this by using advanced cryptography, which is resistant to hacking and adds trust to the transaction ecosystem.

Blockchain has many financial applications, beyond keeping track of trades and transactions. Investors would be wise to research how blockchain is changing the financial system, and how they can gain and regulate exposure.

This article explains what investors need to know about blockchain's increasing role in financial services, and the earning potential as well as risk factors that it presents, for both traditional banks and tech-oriented startups.

What is blockchain?

Blockchain in Financial Services: Benefits

Blockchain and financial institutions are exposed to risks

Buy using Blockchain Investments

What's Blockchain?

Blockchain is a digital record of transactions that can be tracked and recorded in decentralized networks. Blockchain is distributed, meaning that there is no central authority or one entity with the power to corrupt the network. Each block of data in the blockchain contains a record of information and is linked together chronologically. This is what gives the network its confidence.

This innovative technology allows transactions to be managed by securely securing them as soon as they happen. Blockchain is designed to reduce transaction costs and make transactions more efficient and quicker.

There are many ways that technology can be integrated into different industries. This presents investors with many options. It's a key technology behind cryptocurrencies such as Bitcoin.

Financial services are one industry that clearly has applications for blockchain. Companies are constantly trying to lower transaction costs and friction.

The Benefits of Blockchain Financial Services

Blockchain can make financial services more transparent, less prone to fraud, and more affordable for consumers.

Transparency. The financial industry can be made more transparent by blockchain as users perform activities on a public ledger. Transparency can reveal inefficiencies such as fraud and lead to problem-solving that could lower risk for financial institutions.

Adding security. The digital universe has become a breeding ground for scammers as consumers are more active online. This concern could be lessened with blockchain technology. Blockchain technology makes it faster and easier to make payments and transfer money.

Information that flows through financial intermediaries can be intercepted and used to commit fraud. The blockchain's cryptographic algorithms, which provide security in information exchange between parties, can close this gap in oversight.

"In traditional finance audit trails can sometimes be difficult to obtain at times. This has led to economic losses in the past due to negligence or malicious actors," said Ben Samaroo (co-founder and CEO of WonderFi), a decentralized financial platform. This risk can be greatly reduced by using machine learning and blockchain technology to monitor and manage the risks with high precision.

Blockchain is required by financial technology companies and other businesses that use large quantities of data.

Marie Tatibouet is the chief marketing officer of Gate Technology, a Chinese cryptocurrency exchange.

Tatibouet explains that this characteristic increases network resilience and protects it against compromise.

Lower costs. As more investors leave financial advisors to save money, blockchain offers consumers the opportunity to enjoy lower financial services fees.

The financial technology industry has become a major part of the financial service sector. This allows investors to open accounts with digital advisers and make their own financial decisions. As fintech becomes more prominent in global finance, the relationship it has with blockchain will only grow.

This innovation could be good for consumers as investors get more for their money. They also have a balance between the automation of financial services and lower costs.

Samaroo states that the first institutions to adopt this technology will be able to streamline their internal processes and offer lower-cost services to their customers, effectively beating their competition on the cost to capture a larger market share.

This is a win-win situation for the average investor looking to reduce expenses and access this new financial environment.

The Risks Blockchain and Financial Institutions Face

One major risk to the bottom line is the fact that traditional financial institutions are paid transaction fees. This could be reduced or eliminated by blockchain technology.

Consumers can rely on third-party banks and other financial institutions to transfer money.

However, the adoption of blockchain could be bypassed by banks. This would eliminate fees and other costs associated with these services. Banks may have to deal with challenges in terms of volume and transaction-based revenue.

Blockchain makes infrastructure that is proprietary to financial institutions less valuable because it serves as a verification mechanism that's not "concentrated in the power of one institution," according to Thomas Shohfi assistant professor at Rensselaer Polytechnic Institution in Troy, New York.

Blockchain innovation is so rapid that regulation has yet to catch up. The potential impact of blockchain policies can be considered another obstacle to integrating blockchain into financial services.

Tatibouet states that "existing regulation is a significant obstacle to blockchain adoption because regulators will prioritize incumbents over disruptors."

To determine if blockchain technology is suitable for financial institutions, and what its consequences are for consumers and companies, regulators are currently evaluating the pros and cons.

Tatibouet states that "this rigidity has stifled invention so far." "However, this view has changed as governments and other public agencies are beginning to see the benefits of this technology."

Want More Information About Our Services? Talk to Our Consultants

Blockchain Investments: To Buy

There are several ways for investors to get exposure to blockchain technology as it transforms the financial services sector. One option is to invest in companies that are using blockchain technology.

Shohfi states that financial companies and technology companies who see blockchain as disruptive technology and are keen to sell their services to customers should be certified in this area.

International Business Machines Corp. (ticker: IBM) is a company that fits this description. It is focused on developing blockchain technologies. IBM offers services to help businesses integrate blockchain technology for growth, efficiency, and scalability.

Another approach investors can take is investing in cryptocurrency-oriented stocks that serve as a pure-play for blockchain investments. MicroStrategy Inc. Software solutions company MicroStrategy Inc. (MSTR) has a portfolio of more than 105,000 bitcoins that is worth more than $5B.

Square Inc. (SQ), another company heavily invested in Bitcoin, strongly believes in the blockchain network. Recently, the payment services company announced it would launch a decentralized financial platform that will focus on Bitcoin applications.

These stocks are being noticed by investors who see their potential. MicroStrategy has increased by about 80% over the past year, while Square has experienced a 23% increase in year-to-date growth. This compares to the S&P 500's annual return of around 20%. These publicly traded companies allow you to invest broadly in the blockchain without being directly exposed to the volatility or speculation that some cryptocurrencies can bring.

Exchange-traded funds are a good option for investors who want to hedge against volatility and speculation in Bitcoin. The Amplify Transformational Data Sharing Exchange Fund (BLOK), offers investors exposure to companies that can profit from the advancement of blockchain technology. It has been a profitable investment option since its inception in 2018. The fund has seen a 150% return since its inception.