5 Blockchain-Driven Fintech Trends in 2023 and Beyond
April 6, 2023
The ever-growing rise of Fintech has completely changed how we interact with money.
Fintech empowers individuals and businesses to manage their finances faster and more efficiently, empowering them to make better financial decisions and achieve their goals more quickly.
A lot has changed in the Fintech industry, since the emergence of the digital transformation technologies:
Cloud computing has allowed fintech companies to store and analyze vast amounts of data more efficiently, improving risk management, and accelerate fraud detection.
Internet-of-Things (IoT) has made payments with wearables possible.
Big data analytics has allowed fintech companies to gain deeper insights into customer behavior and preferences. This data enables companies to offer more targeted and personalized financial services.
Blockchain technology has also moved the fintech industry forward. By offering a decentralized ledger system, blockchain has enabled financial institutions to provide a faster, more secure, transparent, and accessible way to manage transactions.
The adoption of blockchain technology is already relatively high, and according to Statista, worldwide spending on these solutions is projected to reach $19 billion by 2024.
Whether you're a consumer, investor, business owner, or industry expert, knowing and understanding these Fintech trends is vital to staying ahead of the curve in such a dynamic sector.
Blockchain Identity Management
Digital identity is a set of unique attributes, characteristics, and credentials used to identify a person online. The features can include name, address, date of birth, and other demographic information that we usually use to access digital platforms and proceed with online transactions.
It's hard even to estimate how much personal information we share daily on digital platforms. Different combinations of usernames and passwords, our digital footprint, our demographic data, and various documentation that are often shared online.
Blockchain addresses the common risks of traditional digital identity management (identity theft, mass data leaks, control loss, online platform hacks, and misuse of personal data). As we need to share our documents more and more, the data exchange has to be more transparent, secure and speak "user control".
Blockchain identity management caters to these issues.
The decentralized nature of blockchain technology removes the need for a 3rd party to store personal data and allows highly-secured independent identity management and verification.
With complete control over their data, users can give and revoke access to their identity details anytime.
Seamless data exchange, high security, and user privacy are critical to blockchain-powered identity management.
PayTech is a combined term for everything related to making faster digital transactions: mobile, contactless, and blockchain-based payments, digital wallets, biometric authentication, QR code payments, and others.
Peer-to-peer transactions, small-value transactions (micropayments), and B2B, B2B2C, and B2B2B payments have become safer, faster, cheaper, and more efficient.
Paytech is, undeniably, one of the critical innovations of Fintech. Since its emergence, it has been driving the industry's growth and our money management habits and now makes up 25% of all Fintechs, according to EY (2022).
Financial supply chain
With the help of emerging technologies, supply chains, especially financial ones, became significantly more efficient and transparent, allowing for more accessible financing and payment processes.
Whether for large enterprises or SMEs, blockchain can make the entire financial supply chain visible to everyone with access to it, leave no blind spots, increase control over costs, improve data management, and greatly reduce the possibility of fraud and errors.
Financial supply chains are a great example of private and consortium blockchains. Everyone involved in the association (including 3rd parties) has access to data within the association, but the chain is still kept private from unauthorized users.
Decentralized Finance (DeFi)
Decentralized finance (DeFi) is a new financial system.
It is built on public blockchain networks, such as Ethereum, and is designed to be more open, transparent, and accessible than traditional finance.
DeFi allows access to financial products and services without relying on traditional institutions like peer-to-peer lending, borrowing, trading, and investing.
DeFi solutions rely on smart contracts - self-executing contracts with the terms of the agreement written directly into code, running the rules of the system.
The idea of smart contracts is embracing the trustless manner. Such contracts are transparent, secure, and accessible to anyone with internet access, allowing users to interact with the DeFi ecosystem directly.
DeFi has the potential to further transform the financial industry by:
Enabling greater financial inclusion
Reducing the cost of financial services
Increasing the efficiency and transparency of financial transactions
Have a business need that requires a DeFi solution?
Know Your Customer (KYC) is integral to fintech and its regulations. It helps financial institutions and fintech companies verify the identity of their customers before providing financial services to them.
Since fintech companies often have to deal with sensitive financial and transaction data, it makes them a target for fraudulent activities, including money laundering, identity theft, and financing prohibited activities. KYC is a part of the regulations that helps prevent such actions from happening in fintech.
KYC in fintech involves collecting and verifying customer data (demographic information and government-issued ID). The ID information is cross-checked with various government and regulatory databases to ensure a customer is not associated with illegal activities.
KYC helps to build trust with customers by ensuring that their personal and financial information is secure, which is crucial for the success of any fintech company.
Like any other industry that leverages emerging technology and adapts an agile mindset, fintech is certainly the future. Digitalization, automation, and data-driven decision-making have played a big role in forming fintech, which is quickly moving towards reshaping the financial landscape and enabling new business models. The way we manage money has already transformed, and this trend will continue growing.
Traditional financial systems have been completed by digital payments and payment integration in applications. Payment integration is a quick and elegant solution to attract more customers with better UX and secure transactions in a matter of secs.
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What are the benefits of implementing fintech software in business processes?
From significantly reducing the risk of fraud and data manipulation to increasing the efficiency of financial operations, implementing fintech software into business applications has a lot of potential. Simplified financial transactions, automated invoicing and accounting, and efficient payroll management - are only a few of the benefits of implementing fintech solutions in existing business processes.
The transparency that comes together with blockchain will improve trust among the parties involved in each transaction.
Blockchain-based fintech solutions will reduce transaction costs and processing time and allow seamless integration and data exchange between platforms and systems.
Why blockchain offers such a high security?
Blockchain's native features, like decentralization, immutability, and transparency, ensure blockchain security. The data is stored across multiple network computers instead of a single central location. This eliminates the possibility of failure and makes it more difficult for attackers to compromise the system.
Each block in the blockchain contains a cryptographic hash of the previous block, creating a chain of interconnected blocks - making changing any data without modifying all the blocks extremely difficult.
Each transaction is validated and confirmed through the Proof-of-Work or Proof-of-Stake. These security means to safeguard the data and enable the rule that only valid transactions can be added to the blockchain. Once the data is added to the blockchain, it is nearly impossible to modify and, what is more, delete it. This feature ensures that the information stored on the blockchain remains secure, accurate, and tamper-proof.