Financial services would be one of the most transformative areas of blockchain. Building cryptocurrency exchanges and writing digital assets to a blockchain are just two examples of how today's progress will have a long-term impact on the industry. The use of blockchain technology has the potential to cause significant market disruption. Incredible progress has already occurred, and this is just the beginning of a massive transformation.
- Definition / Scope
- Market Overview
- Market Risks
- Market Drivers
- Market Restraints
- Industry Challenges
- Technology Trends
- Regulatory Trends
- Other Key Market Trends
- Impact of COVID-19
- Market Size and Forecast
- Market Outlook
- Technology Roadmap
- Competitive Landscape
- Competitive Factors
- Key Market Players
- Strategic Conclusion
Definition / Scope
Blockchain technology provides a way for untrusted parties to come to agreement on the state of a database, without using a middleman. A blockchain may offer basic financial services such as payments or securitization without the need for a bank by offering a database that no one manages. Furthermore, blockchain enables the use of tools such as "smart contracts," which are self-executing contracts built on the blockchain that have the ability to automate manual processes ranging from enforcement and claims processing to the distribution of the contents of a will.
Blockchain technology and DLT have a massive opportunity to disrupt the $5T+ BFSI industry by disintermediating the key services that banks provide, including:
Payments: Blockchain technology could allow faster payments at lower rates than banks by creating a decentralized ledger for payments (e.g., Bitcoin).
Clearance and Settlement Systems: Distributed ledgers have the potential to lower operating costs and get us closer to real-time financial transactions.
Fundraising: Initial Coin Offerings (ICOs) are a modern type of finance experiment that separates access to capital from conventional capital-raising services and companies.
Securities: Traditional securities, such as stocks, shares, and alternative assets, may be tokenized and placed on public blockchains, allowing for more accessible and interoperable capital markets.
Loans and Credit: Blockchain technology can make borrowing money more safe and have lower interest rates by eliminating the need for gatekeepers in the loan and credit industry.
Trade Finance: Blockchain technology can improve transparency, protection, and confidence among trade parties around the world by replacing the inefficient, paper-heavy bills of lading mechanism in the trade finance industry.
Customer KYC and Fraud Prevention: Blockchain technology will make it simpler and safer to exchange information between financial institutions by storing customer information on decentralized blocks.
How do Blockchains Work?
Blockchains require complex algorithms to ensure they are secure, but their application is relatively straightforward. Ledgers, or blocks, are represented as cryptographic codes, or hashes, which record the transactions in the system. Transactions in the intermediated world are validated by banks, which guarantee ownership of money and ensure it is not expended more than once in the case of payments. Blockchains do this by relying on a network of participants to verify and transparent transactions by solving complex algorithmic puzzles.
Conformance is enforced by checking transactions against the present state of the ledger, and the effect is the elimination of much of the credit, liquidity and operational risks inherent in the intermediated system.