Blockchain and Fintech: a perfect marriage
Most financial applications use the banking system as the processing point. But blockchain technology is more disruptive in that it aspires to the removal of intermediaries. For this reason, in today’s article we tell you why Blockchain and Fintech are the best combination. Are you interested? Keep reading.
Statistics on Blockchain
According to the latest graph of the Gartner cycle of emerging technologies (2018), it can be seen that blockchain technology can be found at the limit of the peak of inflated expectations and in the abyss of disappointment. But we can also find data security in Blockchain in the launch phase, as we can see in the following graph:
Although the most popular use of blockchain technology is in the process of clearing payments through the elimination of commercial and central banks, with potential in the stock market, smart contracts , remittances, medical services, etc. audits, electoral processes…
Why Fintech with Blockchain?
Blockchain is an emerging technology that can radically improve banking and other transaction networks, giving them new opportunities for innovation and growth while reducing cost and risk.
Blockchain technology offers market participants a way to directly access dematerialized assets without going through other participants unnecessarily, as can be seen in the image below:
In the centralized repository (the system that is currently being used) most of the participants are disconnected from their asset deposits, the settlement transaction requires the participants to collaborate in a slow, inefficient and costly flow, as can be seen in Fig. following image:
Centralized repository system slow, inefficient and expensive
Therefore, a shared repository will offer all participants that they can interact with the repository directly without involving third parties, which makes post-trade operations cheaper and faster.
The different applications that we can find within the financial sector that are best adapted to blockchain technology are:
- Financial instruments : cross-border payments, private equity, derivatives, business records, expense records, mortgage and loan records, and microfinance.
- Processes : clearing networks, international transfers, clearing and settlement, audits, reconciliations, reporting, settlements, and asset ownership.
Blockchain for the financial market
Trading, clearing, and settlement functions can be automated on a blockchain network using smart contracts and oracles, as the following image shows:
Smart Contracts thanks to the BlockChain network
The market we find exchange applications where they can live on the blockchain or outside the blockchain. That is, off-blockchain applications are often more centralized, but are likely to offer better performance.
The final clearing/settlement of financial assets can be automated through smart contracts, which have direct access to the assets defined on the chain.
And finally, oracles are off-blockchain development services that integrate on-chain contracts with existing systems; network participants do not interact with oracles directly.
Blockchain ecosystem and fintech in financial services
We can find multiple fintechs already on the market that work in different sectors such as smartphone or digital payments, capital markets, banking corporations, analytics and big data , cryptocurrencies and bitcoins , financial platforms, crowdfunding and crowdlending, finance management, personal and blockchain technology.
Fintech in today’s market
But the adoption of blockchain technology in the financial market started in October 2013.
Origin and history of the Blockchain
From here, collaboration strategies were formed by traditional entities that have forged alliances and created laboratories, hubs and accelerators to promote innovation, adopt emerging technologies and participate in the fintech ecosystem, through fintech banking synergy that allows prioritizing strengths and experience of each sector , where banking allows fintech models to scale through infrastructure, capital and customers, and fintech is the innovation and disruption that helps banks offer more value and services.
Examples of Payment Blockchain Fintechs
The first fintech project that I would like to highlight would be ‘ 2gether ‘, a collaborative financial platform, which works with a card where it exchanges cryptocurrencies for money in circulation on the market (euros/US dollars) to make payments through the conventional card payment terminals.
Another payment fintech that we can find is ‘ Marketpay ‘, a smart payment platform for digital businesses, in which you can make custody payments, count votes, crowdfunding campaign payments, payments in solutions for the Internet of things ( IoT) , payments in second-hand sales and smart payment platform.
Finally, the wallets , which is the software designed to save, send and receive cryptocurrencies. In the wallets we can carry out transactions with digital or virtual currencies and they can be comparable to a bank account. As an example we can name ‘ Coinbase ‘.
Blockchain example in capital markets
The company that wants to highlight within this point is ‘ Symbiont ‘ where it develops products in smart contracts and distributed ledgers for use in capital markets.
Provides an interface for specifying terms and conditions when issuing smart securities, as well as integration with market data sources . Smart securities are self-executing smart contracts. Autorun reduces the time and cost of managing and transacting with traditional systems.
Examples of Blockchain in legaltech
The first project I want to highlight is ‘ Finboot Tech ‘ which is a digital platform for signing smart contracts for corporate use. Current applications that are working:
- Black labs: certifies the quality of petroleum products and the monitoring of their production as they exchange hands between the different actors in the supply chain .
- SALMA: uses the blockchain for data protection, returning control of their data to the user and helping companies adapt to new regulations.
On the other hand, we can find the company ‘ Chainalysis ‘ that allows tracking transactions in blockchains and helps identify and stop those people who misuse cryptocurrencies in cryptocurrency development company , that is, with illicit activities, fraud, extortion and money laundering.
These are the latest news that the financial market brings us with the union of technology, if you liked it and want to know more about Fintech and BlockChain, we encourage you to watch the Webinar where you will learn everything you need to get started on the subject.
If you want to delve into the subject and become an expert capable of undertaking in the Fintech world, consult our Master in Blockchain and Fintech and update yourself thanks to practical training with professionals dedicated to the Blockchain and Fintech world.