Why is blockchain so important for the evolution of FinTech?

By Puja Sharma

Blockchain development companies have a leg up in the current financial sector, where FinTech is reshaping the sector. It is expected that the adoption of the new economic model by users will have a major impact on the rate and scope of this transition. People have grown tired of black boxes and want to be in control of how their data and money are transferred, according to the blog published by Finextra.

A business network using blockchain keeps track of transactions and assets using digital ledgers, or blocks. Decentralized ownership of this technology is well-known for its benefits of democratizing processes, as well as ensuring security, transparency, and efficiency. Transactions between two persons or the tracking of the custody of couriers may be carried out using blockchain.

The platforms, which were built to provide “accurate reporting, monitoring, and analysis of all forms of digital financial transactions”, are an intriguing use of blockchain technology.

One of the examples is Bitcode AI, which allows beginner crypto investors to make the most out of their trading process. In addition, this AI-powered tool is practical for those who are afraid of losing money. The tool might be useful for individuals who want to generate a strategy suitable for their interests, as well.

Circle became one of the blockchain companies included in the list of the most innovative FinTech companies of 2019 according to Forbes. It was developing a P2P payment technology. One of the company’s major products is the Circle Pay platform, which allows users to store, send and receive traditional currency.

Another notable name here is, that Veem uses blockchain technology to execute payments. Veem is a P2P payment platform designed for small businesses. The company’s goal is to simplify cross-border transfers and payments to suppliers and contractors. Transfers are executed in three ways: treasury, SWIFT, and blockchain. Treasury, in this case, implies that money, which is being transferred between bank accounts, is controlled by Veem.

The evolution of FinTech

The financial sector was one of the first to make use of IT and reap its benefits. Thanks to FinTech, financial institutions are increasingly leveraging new technology to gain a competitive advantage in the market and enhance their operational security.

A significant step forward by allowing mobile phones to make international payments and transfers and to withdraw cash from ATMs in remote locations. This is becoming more common. As a result of the introduction of mobile internet and digital communications, the capital market was shaken to its core. People were able to connect and share information within a global financial ecosystem, which resulted in the emergence of completely new tools.

Blockchain and FinTech transformation

Using blockchain technology, FinTech companies can communicate and transmit secure and unmodified data over a decentralized network. This prevents data breaches and other fraudulent activities. Keeping data safe even when encrypted, allows humans to trust machine-driven intelligence because it makes it easier to monitor, understand, and audit its choices. Due to the use of blockchain technology, many of the stock market’s dubious practices could be eliminated, such as stock manipulation, the delay of processing, and middlemen commissions.

Transferring money or other assets via traditional banking has always taken a long time. It may take a long time for two banks to complete a transaction involving a small amount of money. The use of blockchain technology in fintech applications allows money to be transferred in minutes, regardless of the amount.

A blockchain is also decentralised, meaning no one has control of the chain. It can’t be altered in any way. Using distributed ledger technology each transaction, or block, is recorded via a node which can be any smartphone, computer, or larger server, and there is nothing linking the nodes. 

Blockchain’s heightened security offers multiple advantages, one of which is that you can bypass traditional fraud prevention methods which require multiple parties to validate transactions. Every financial transaction requires an authority to validate it, whether that is Visa or American Express processing your card payment, or the many people employed in investment banks as transaction validators.

Democratising money management

The most high-profile use of blockchain in FinTech has been cryptocurrencies, which allow you to hold your money without a bank.  Those who purchase Bitcoin, Ethereum, or any other coin, can choose to hold their currency in their digital wallets. Wallet-holders have a private key, which is needed to send and spend their crypto, and a public address allowing them to receive payments from others.

FinTech developers will be able to design top-tier auditing methods by building blockchain-based applications. No matter how large the system grows, the blockchain acts as a repository of linear blocks that adds a new record for each subsequent activity. An audit of all transactions may be completed quickly and securely using the information provided by this system, assuring complete transparency.