And How That Increases Competition in FinTech
In a recent survey conducted by PwC, 544 C-suite executives were interviewed on their views of blockchain and the future of banking. The study revealed an astonishing 95% of executives in banking believe elements of their business are at risk to various FinTech startups- many of which are powering their solutions through blockchain technology. Of the executives surveyed, 56% of them claimed to recognize the importance of blockchain.
While financial services such as banking become concerned with FinTech taking hold of their market share, FinTech companies have concerns of their own.
Is adopting blockchain technology a necessity to survive in this fast changing industry?
While executives in traditional financial service companies may be losing sleep over the rise in FinTech, the benefits blockchain provides to financial technology is becoming more and more difficult to argue with.
Centralized databases, the likes of which are used by banks, stock exchanges, and money transfer services are a vulnerability to hackers. These can be exploited to manipulate an entire database and steal user data.
The very nature of blockchain and distributed ledgers make it difficult to penetrate. Distributed Ledgers are decentralized databases.
What this means is:
A hacker attempting to hack a centralized database has to break into one house to get what he or she wants. A hacker in a decentralized database has to break into every house in an entire neighborhood to be able to get what he or she wants from any individual house within the neighborhood.
Faster and Secure Transactions
It’s difficult to pinpoint an industry with more intermediaries than Finance. The transfer of capital within a country is inefficient, when the scope is broadened to include international money transfers, the problems are more abundant. The main issues contributing to these inefficiencies are the time spent transferring the money, and the security in which its transferred.
With Blockchain, money can be transferred across the globe with a few clicks. The transfer time with smaller blockchains is often instant, and with Bitcoin and Ethereum can be anywhere from 5–30 minutes. There are no intermediaries involved, and the fees are minimal: smaller than found in any other money transfer alternatives. The sector that is especially ripe for disruption within Finance is money remittances. These companies charge a premium for transferring funds to other countries. If they do not change their fee structure drastically, they will soon become obsolete to blockchain fueled alternatives.
Universal Customer Identification Processes
Financial institutions currently spend around 500 million USD on Know Your Customer (KYC) processes for their customers. The process of performing this requires cooperation between several different financial institutions to verify information.
Through the use of blockchain, an individual can verify their identity and KYC themselves through one platform. There are already projects on the market that aim to be immutable digital records of identity. Once a market leader has established itself, there can be an immutable ledger of pre-KYC’d individuals that financial institutions can securely procure data from.