The latest development & advancement in the Blockchain technology is likely to have a significant impact on the world of business especially in financial service industry. Our financial system moves trillions of dollars and serves billions of people daily. But the system is rife with the problem, as the addition of cost through fees and delays, the creation of friction with the because of redundant and onerous paperwork and most importantly creating doors for fraud, crimes & scams. To wit, all these, about 45% of the financial intermediaries such as stock exchanges, money transfer services, etc are suffering from economic crime every year, out of which about 37% is of the entire economy and only 20% & 27% respectively for the professional services and technology sectors. It states a big question that why our financial system is looking so inefficient. The answer to this is first, it is antiquated and dressed up in the digital wrapper, secondly because it is centralized, and thirdly, it is exclusionary.

By the year 2016, the blockchain companies have raised $400 million from the traditional venture investors and nearly $200 million from what we call the ICO. Financial intermediaries are at a good job, but at some limitations, yet it crosses the border remittance payment as high as 10-20% and can take days to clear and settle. Today, we people rely upon the rating agencies, financial data analytics firms, retail and wholesale banks to establish the trust, verify the identity during a transaction. According to reports, in 2015 it is estimated that the blockchain could reduce the bank's infrastructure cost attribute and its security trading may lie between the US $15 to 20 billion per annum by the year 2022. For most of the large financial institutes, the exploding blockchain opportunities will be continued to experiment and innovate the banking sectors.

The scope of Blockchain in Finance Industry

Though the recent use of blockchain technology is seen in Bitcoin (mostly), however, there are many banks who are willing to experiment with this new technology. Here are some of the ways in which blockchain technology has flourished its scope in the financial industry as:

• Fraud reduction

Despite being a new technology in the market, the blockchain has the potential to reduce the fraud in the financial sector which is gaining more attention in this economic environment. There are most of the banks which are prone to cyber attacks since they are built on a centralized database.

• KYC

On the upkeep of KYC (know your customer regulations), the financial institutions have spent a huge amount. The KYC intends to reduce the money laundering and many other criminals and fraudulent activities by giving the banks to identify their customers.

• Trading platform

The technology like blockchain can definitely help their customers to reduce the risk of fraud and operational errors. The ASE & NASDAQ are already looking at the blockchain based solutions to improve the efficiency and to reduce the cost.

• Insurance sector

The insurance is the bidding contract between two parties that involves a number of steps such as premium payment, filling claim, etc. This technology may change the way of insurance business runs by replacing the legal contract.

The future state of Blockchain in Finance Industry

As the digitalization has changed the game for IT sector, the transformation of the financial service industry is at the top of mind for everyone in this field. According to the CrunchBase News, by Feb 2018, the amount of venture capital fundraising for blockchain based IT software companies have already reached more than 40% of the last year’s total. As of April 2018, there were 2191 blockchain startups listed with a combined value of over $4.4 million, according to AngelList. This technology has the potential to drive simplicity and efficiency by establishing new financial services infrastructure and processes. As per the data predicted, the blockchain space is going to expand about 42.8% by the year 2020. There is no secret that the blockchain bears the immense potential to spend a variety of human system.

The Blockchain related to the Linkedin jobs are tripled from the year 2017 to 2018, according to the sources. The global spending on blockchain solutions in 2018 equals $2.1 billion. By the end of 2017, it was noticed that 600 billion was the size of the entire cryptocurrency market. As per the search data from Google trends, there was a sharp rise in the interest on blockchain just after 2016. This shows us that the immense potential tech holds the future growth of blockchain technology as more and more people gain the awareness of the concepts like Blockchain, Bitcoin, Ethereum etc. According to Kevin Sherman, the traditional banking structures have been immersed on a guarantee of your money’s safety and security, but times are changing when the technology via cryptography can promise financial security with faster services and at cheaper service cost.

Benefits of Blockchain in Finance Industry

Since there are many advantages of using Blockchain technology, that’s why it is making a very strong place in finance industry swiftly. But, its applications do not only ends with Bitcoin or any other cryptocurrency. To lead with financial institutions is quite enthusiastic about what blockchain technology can actually do for them. Below are some of the benefits of Blockchain technology in the financial industry described in detail as:

• Cheaper Banking

About the cost reduction benefits of blockchain technology, the banks are also quite optimistic. The key areas of banking sectors will be the distributed database that will save the money on its international payments. With the help of blockchain technology, both the parties can reach to an agreement on the transactions’ validity time period, without any requirement of beauracy authority.

• Instant Settlements                                                       

The recent methods for spot trading are not an instantaneous process. Even though the idea behind the spot trading is just for the instant delivery of the traded instrument, but actually, it requires 2 to3 days to settle the majority of transactions. All this is due to delay of associated parties used win transactions such as brokers.

• Improves capital optimization

One of the most promising features of blockchain technology is that it removes the need for trusted immediately and make the peer to peer transaction possible for the customers. When this technology is applied in financial industry, it could render the useless fee charging intermediary such as custodian banks or clearers.

Benefits of Blockchain on Finance Industry

• Improved Contractual performance

When the use of smart contracts is being done in banks and financial institutions, then it will automatically improve the contractual term performance as smart contracts will execute automatically once certain pre-set conditions have been met. Because of which, R3CEV has tailored the use of smart contracts within the distributed ledger.

• Increased Financial solutions

Due to crypto or digital currencies or tokens, there is an increase in the number of options for financial solutions. One token has a value of $1 loss and each token could be seen as an IOU. After the initial drop in the price of about $0.30, not, it trades around $0.80 and Bitfinex is back to operating as it was doing before.

Conclusion

Blockchain technology is an emerging technology-driven service which proxies to change the way financial transactions have been conducted for the customers. It can reduce the risks and frauds which will spike its demand in future thus to make it as the new buzz in the financial sector and to bring more security in day to day transactions.