Blockchain with its decentralized and trust-less features has opened up a whole world of new opportunities and benefits for the fintech industry. You might remember that there were days when lenders used to go through paperwork that used to consume a major chunk of time further in processing their applications. Validating documents or just a simple transfer of funds, these things consume a major chunk of time and effort to get processed. But Blockchain has the ability to cut short those problems.
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What is a Fintech company?
Fintech companies are those firms that apply the use of software and hardware to over financial services in order to improve and automate financial services for businesses or consumers. Blockchain development in fintech brings private and permissioned networks to suit fintech enterprises, as information verification can be a risky affair over a public network. Here Blockchain can play an important role by providing a trust-less secure environment to users to provide them with better customer experience and accessibility.
Important factors how Blockchain is disrupting the finance sector
Blockchain has grown into one of the top emerging technologies at the current time, and it has been widely adopted into the finance sector due to some innate qualities it possesses. might make you wonder what led to its so much wide popularity. Below I will mention those top factors of Blockchain which are redefining the fintech industry and taking it to new heights.
Security is one of the important key factors which Blockchain offers to fintech companies, as every transaction made over the network is recorded. A transaction after being approved is encrypted and linked to the previous transaction. The information regarding such transactions is stored across a network of computers instead of on a single server, and this makes it very difficult for hackers to alter the data. We have seen lots of instances of data being stolen, and information being breached from centralized servers in this world of the digital era. Such loopholes which lead to such data breaches are very conveniently addressed by providing a high level of security through cryptographic methods and the decentralized nature of Blockchain makes it impossible to penetrate into the whole network.
The very idea of Blockchain is based upon decentralization, and the decentralized feature of Blockchain lets the system keep operating even if a part of the network fails. Since the database is distributed across multiple locations in the network, so even if a participating party exits the network due to some reason none of the data on the network will be lost. This feature of decentralization helps in fostering a sense of security in the minds of users and fintech companies alike.
Blockchain offers transparency due to its distributed ledger mechanism. It is a feature where all network participants share the same documentation as opposed to individual copies of documentation. Such a shared version can only be updated through mutual consensus by all participating parties, which would have every record over it known and remain transparent.
Blockchain’s transparency feature plays an important role when adopted, as it empowers the enterprises to verify the user furnished document’s originality, validity, and much more, along with reducing the scope for potential fraud and tampering of documents.
Highly Flexible and Futuristic
Blockchain technology is very flexible technology due to its high level of adaptability and its usage in numerous applications has certainly proven it. To execute a transaction in the blockchain, cryptography is used over the network, which makes transactions happen in a flexible manner. Blockchain can be collaborated together with other technologies like AR, VR, or IoT to make use of its immense potential. Blockchain-based web 3.0 and emerging Metaverse technologies will certainly make fintech companies put more emphasis on authentication techniques like fingerprint scanners, speech analysis, and facial recognition software. The flexible nature of Blockchain can is capable of building robust futuristic solutions for the fintech industry.
Conclusion – The role of Smart Contracts
Blockchain even removes the need for a third-party arbitrator like legal advisors for fintech companies with the use of automated Smart Contracts. Earlier the creation of digital assets was nearly impossible, but with the use of Blockchain that became a reality. In fact, the blockchain experts at Rejolut say that, Blockchain is the first technology that lets people transfer digital assets in a very secure and decentralized way and this has taken fintech companies to a new dimension.