Financial services are constantly changing and evolving. Most of this change is driven by technology and its latest advances. We could be about to see another technology-driven change in the sector thanks to the rise of blockchain technology. There are lots of opportunities for improvement and better customer services in the sector if this change has the impact many expect it to. Read on to learn more.
What is a Blockchain?
First of all, we need to make it clear what blockchain technology is. It’s a digital ledger that’s incorruptible. They can be programmed to record pretty much anything, including financial transactions. To date, the best example of blockchains being used is in the form of digital currency, such as Bitcoin. Because the digital information can be distributed but cannot be copied, it lends itself well to financial dealings. When a transaction is requested, it can be validated and verified before being approved. This is when new blocks are permanently and unalterably added to the blockchain. The transaction is then complete
Why Blockchain Matters to the Financial Services Sector:
Cutting Out Supply Chain Middlemen
Supply chains are often cumbersome and difficult to manage efficiently. This is something that blockchain technology could end up changing massively as we move forward. When goods and their ownership can be transferred automatically using blockchains, all of this will be done without the input of middlemen. It could make things so much more efficient for companies and customers. Only the people that matter in a transaction will be a part of it because the blockchain itself will do the job that used to be done by lots of middlemen who only slow down the process and make it more costly. In the future, many businesses and individuals could benefit from this.
Streamline and Speed Up Processes
There are lots of other kinds of processes that can be sped up and streamlined as a result of the use of blockchain technology as well. Anything that involves asset management can be automated using blockchains. There will be much less risk involved, and it could speed up the rate at which automation enters the financial services sector. That’s because blockchains are reliable and secure. They can’t be interfered with by people outside the business. As mentioned above, they are also completely incorruptible. This offers a greater level of security businesses while also streamlining their processes. This could be massively beneficial to all kinds of companies.
Making International Payments
These days, business is something that happens on a global basis. Companies on opposite sides of the world to one another often have to do business, which involves transferring money. Unfortunately, transferring money across borders can still be very slow and time-consuming for businesses. Blockchains will allow round the clock real-time financial transfers. This is something that is still not possible right now. But blockchains are secure and they are instantaneous. Borders and time zones don’t matter to them at all. There are businesses all around the world that will want to take advantage of this capability.
Insurance Claims Processing
Risk modelling is another thing that could be taken care of by blockchains in the future. And this could have a big impact on the world of insurance. Tracking ownership of possessions will be much easier thanks to blockchains as well. They can permanently store records of ownership, allowing insurance companies to track the origins of items and reduce the number of fraudulent claims made. It could really speed up how businesses operating in this sector function. This is not just a good thing for them but also for their customers. Their satisfaction should improve because claims processing will not take as long as it previously did. So, companies and customers could both be made happier by blockchains.
Anti-Money Laundering Measures
Security is a big deal in the financial services sector. It’s not hard to see why. There will always be a minority of people who want to use financial services to launder money that has been obtained illegally. The fight against this kind of activity has been raging on for a long time. And there is still no easy answer to the problem. However, part of the solution could be blockchains. Records stored in a blockchain can be used to identify a person. And however blockchains are used by financial services companies, they will be much more tightly secured because of the inherent properties of blockchains. There are so many ways in which blockchains could help with anti-money laundering efforts in the years to come.