Experts are optimistic about the opportunities to apply blockchain in the finance industry.
It is not just the cryptocurrency bitcoin you have heard about recently. Blockchain has unlimited applications because of its properties of being secure, transparent, and immutable.
Thus, we publish this article to help you fully understand how blockchain is changing the finance world now and in the future!
For the time being, blockchain expands its presence in four categories: Money transfers, financial security, smart contracts’ automation, and the storage of customer data.
Money transfers are the process of transferring money from one party to another, usually made through an electronic payment system of credit unions, banks, or financial service institutions. Those using such a process need to pay transaction fees, which can be expensive if the money transfers are across the countries and in a very short time.
The advent of blockchain technology has rewritten the concept. Accordingly, companies adopt digital currencies like bitcoins as an alternative to money to enable remittance services. Such an application solves the issues of time and cost since blockchain is accessible to people worldwide, then the transactions are automatically executed by smart contracts in no time.
Some prominent examples of businesses applying blockchain in their financial services are Align Commerce (US), Coins ph (Philippines), CoinPip (Singapore), Volabit (Mexico), etc.
Financial transactions are always targets for hacking and fraud. In addition, they risk stolen information when transactions pass through payment processors or third-party intermediaries.
Many businesses now leverage blockchain to create a decentralized-trust system instead.
The technology use algorithms of cryptography to process and record transactions without interfering with third parties. As a result, it limits the possibilities of fraud and exploiting efforts. Transactions must also meet all conditions of smart contracts, or they will be rejected.
Smart contracts are key to the blockchain.
They are smart enough to automate pre-determined conditions to execute contracts between parties. Besides improving the security of transactions, as explained above, smart contracts eliminate human resources and avoid delays in running financial contracts.
For example, a mortgage business used to run an outdated and laborious framework to approve loans. It involves third parties and employees reviewing different financial documents and sending them via email to facilitate the process. Their documents also need a signature to track and make progress. Meanwhile, smart contracts digitalize and largely automate the payment process upon collecting e-signatures.