Blockchain technology is disrupting financial institutions in radical new ways. Rather than replacing what already exists, it creates an entirely new market and an avenue to bank the unbanked.

Blockchain is creating new financial solutions that scale faster and are cheaper, more secure and more accessible to even ordinary men on the street. It has removed the barriers to enjoying financial services, enforced security, removed middlemen and enhanced transparency.

Once touted by investors as worthless and called unprintable names by traditional financial institutions, blockchain is now at the forefront of acceptance and mainstream popularity in the global financial industry. Fintech companies are in an arms race to develop the best blockchain platform to support all types of transactions in unique contexts.

Will Fintech And Blockchain Replace Traditional Financial Institutions?

Traditional financial institutions may not disappear entirely for several reasons. For example, if you want to use a bank account to prevent fraud and theft, there’s no better way than through banks.

Furthermore, if you want to store your cash, you can do so in any country with a stable currency; this won’t be possible on blockchain platforms due to cryptocurrency market volatility. And finally, many people simply aren’t comfortable with using cryptocurrencies as they feel these new currencies will have an unstable value, negatively affecting their finances in the long run.

However, blockchain will allow traditional financial institutions to cut down a significant portion of their costs. This will result in more cost-effective services that are aimed at the everyday person rather than only the upper class.

Eight Effects Of Fintech And Blockchain On Financial Institutions

Below are just some of the impacts that fintech and blockchain will have on financial institutions:

1. Improved Service

Blockchain will be able to offer personalized services that fit specific needs. For example, suppose you are a trader—your bank’s platform should provide you the ability to monitor the performance of your digital assets portfolio in real time. In contrast, if you’re a person who wants to open a savings account, you only need a simple online banking service.

2. Speed And Cost Savings

Blockchain technology can save businesses significant amounts of time and money. If you open a small business and want to pay taxes and other utilities, you must apply for a license. The process is tedious and complex, but the financial institution will require the information from you (your bank account), which limits the number of businesses that can access this service.

On the other hand, blockchain could quickly provide this service as it can be programmed to accept information from any source with no human intervention needed. This means that every business could apply for a license without taking days off work or the like.

3. Shift In Control

Human wants are changing and evolving. These growing demands for open and secure financial transactions demonstrate the inability of traditional financial institutions to meet the needs of their growing customers. The democratization of finance is imminent, and traditional financial institutions will be decentralized by the disruptive power of blockchain. Users will own and manage their data without having to deal with middlemen.

4. Huge Size

The number of transactions a blockchain can process will be more than that of traditional financial institutions. Speaking of volume, blockchain platforms have what it takes to manage high transaction volume without slowing down, which is a viable competitive advantage. There are no limits; blockchains do not need to rely on intermediaries to process any transactions efficiently.

5. Faster Transactions

Financial transactions that were completed in days will now take seconds over blockchain platforms. This is because blockchain transactions do not require third parties for verification; rather, they are stored publicly. Once you request one network node, it will be processed immediately across all nodes.

6. Lower Costs

Blockchain technology will help reduce financial institutions’ operational expenses. This is because smart contracts will immensely reduce the need for manpower and other related operating costs. Especially for large banks, cutting down these overhead costs will be an effective way of boosting their profit margins since they already have a lot of clients. The cost savings that blockchain can bring to financial institutions are immense; it will offer services that provide more excellent value at lower costs than what’s currently available on the market today.

7. Better Transparency

Blockchain has better transparency than traditional financial institutions do. For example, if the U.S. Securities Exchange Commission wants to trace the origins of insider trading, it can easily do that using blockchain. If we compare this with banks, tracking payment origins through them is challenging, but the blockchain is completely possible and can be done in just a few seconds.

8. More Opportunities

Due to their limitations, there will be vastly more opportunities and services that traditional financial institutions don’t provide. For example, investments in the stock market that require significant amounts of time and money won’t be offered by banks because they wouldn’t be able to process such transactions efficiently enough.

Final Words

The rise of blockchain technology is bringing about a revolution that will help eliminate some of the limitations of traditional banking. This change will give everyone access to financial services, which means that underprivileged, facing economic problems, and non-financially included countries can be financially included now.

Read more @Forbes

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