Blockchain’s introduction to the world has been nothing short of a blessing in disguise. Of course, no one could foresee the immense contributions this technology would bring to industries when it first launched in 2009. But, much to the delight of businesses and individuals worldwide, blockchain has been a fundamental tool in facilitating technological advancements in the modern world.
More specifically, finance technology, better known as fintech, has benefited immensely from embracing blockchain technology. After all, the distributed database not only facilitates safe and tamper-proof transactions but, thanks to its inherent immutability, also reinforces transparency and automation. Not forgetting its crucial role in boosting innovation in a rather mundane industry.
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Blockchain in Fintech: Transformative Use Cases
Did you know that the concept of traditional banking has existed since 2000 B.C.? Well, it all began in Ancient Mesopotamia, where priests would lend out resources in the temples to merchants and local farmers while also keeping records of such transactions. Ancient Greece later introduced moneylenders and private repositories, which Medieval Europe later embraced in the 13th century.
However, modern banking, as we know it, can be traced back to the launch of the Bank of Amsterdam in 1609. Operating like a central bank, this bank stabilized local currency and served as the model for other central banks like the Bank of England. However, as the banking industry was advancing, so did banking robberies, especially during the era of Bonnie & Clyde in the early 1900s.
To date, the finance world has been up in arms trying to provide tamper-proof financial services while also guaranteeing unparalleled accessibility. That includes introducing fintech solutions, which leverage cutting-edge technologies like blockchain to enhance security, efficiency, and accessibility in financial transactions. Below are the major use cases of blockchain technology in fintech:
a) Cryptocurrencies
Often, talking about blockchain without mentioning cryptocurrencies is similar to expecting all wins when playing at a casino. After all, cryptocurrencies wouldn’t exist without blockchain. With more and more fintech companies, like Interac e-transfer, supporting crypto, the integration of blockchain technology in mainstream fintech solutions is growing tremendously.
An excellent use case scenario for this is in the online gambling world. Thanks to fintech solutions, crypto enthusiasts can now play popular casino games without stressing about how to convert crypto to fiat currencies. That way, they can enjoy transparent gameplay at top online casinos efficiently and cost-effectively without worrying about the security of their transactions, thanks to blockchain technology.
b) Cross-Border Payments
When it comes to blockchain, the real jackpot lies in the fact that it’s internet-based. That means users don’t need special equipment or setup to use. As a result, regardless of the location, users can access data and conduct transactions on the blockchain from virtually anywhere. Not forgetting the speed, security, cost efficiency, and transparency benefits that come along with using this groundbreaking technology.
That’s why most cross-border transactions take place on the blockchain in this modern age of innovation, especially when considering transactions in the online gambling space. Not to mention that the resulting costs are 60-80% cheaper than traditional cross-border payment solutions.
c) Identify Verification
With increased efficiency in the financial sector, the demands for heightened security are also rising. After all, fintech companies must also adhere to Know Your Customer rules as well as Anti-Money Laundering regulations. Instead of using time-consuming processes of submitting identity verification documents, blockchain has a better solution, where you don’t have to gamble with the security of your personal data.
A new crop of companies are providing solutions that rely on blockchain’s immutable and transparent attributes. Here, users only have to share a minimal amount of details to authorize online transactions. That way, fintech companies can easily comply with KYC/AML rules while users can control the amount of personal data they share.
d) Decentralized Finance (DeFi)
The Great Recession of 2007-2009 made people increasingly aware of the role of banks, world governments, and fiat currencies in the event of an economic crisis. Thanks to blockchain technology, Decentralized Finance (DeFi) provides an innovative solution where the processing of peer-to-peer payments takes place against an unchangeable miner and ledger network, thanks to the use of smart contracts.
Since no single entity controls DeFi platforms, people can independently buy and sell their digital assets across a peer-to-peer system. In other words, crypto users can be sure that the pricing of digital assets accurately represents the supply and demand of traded digital assets. That’s why the use of decentralized crypto exchanges has become such a hot topic recently.
e) Non-Fungible Tokens (NFTs)
As part of the Ethereum Network, NFTs provide a way to gain fractional ownership of digital assets, including art, media, content, collectibles, and other internet-based assets. Fintech companies are taking advantage of this innovative way of gaining ownership by tokenizing real-world assets like real estate, intellectual property rights, stocks, etc.
With the help of smart contracts and blockchain, anyone can trade with these digital assets seamlessly, and the relevant transactions are recorded on the network for transparency. Of course, this is only one of the ways that blockchain has helped democratize investment opportunities.
Will Fintech and Blockchain Take Over Traditional Banking?
Given the increased popularity of fintech solutions, many speculate that traditional banking systems will soon become extinct. However, the truth is that conventional banking solutions are still quite popular, especially when discussing credit/debit card payment options. So, while fintech, blockchain, and traditional banking will continue to co-exist, fintech and blockchain are surely going to own the larger market share.
