Application Trends in the Fintech Blockchain Market
The fintech industry recognizes and leverages blockchain technology’s transformative impact for efficiency, generating more revenue, improving the delivery process and end-user experience, and reducing business operations risks. Blockchain is a digital and secure distributed ledger that tracks transactions over a peer-to-peer network. Inkwood Research anticipates the global fintech blockchain market to propel with a 40.66% CAGR between the forecasted years 2023 to 2032.
Blockchain technology is extensively used in the healthcare, energy, and automotive industries. It utilizes a shared database that allows members to access and view transaction records, ensuring each party involved in a transaction has an identical, up-to-date version of all records. The key element here is decentralization – no single party controls the data or has absolute authority to modify transaction records.
Why are Fintech Companies Incorporating Blockchain Technology?
The key element of blockchain technology is decentralization – no single party controls the data or has absolute authority to modify transaction records. As a result, blockchain operates with a higher degree of accuracy, transparency, and trust between parties involved in various transactions.
As the world increasingly moves online, there is an ever-growing need for a secure, trustworthy means of conducting digital financial transactions. Distributed ledger technology holds massive transformative potential for the fintech sector.
Distributed ledger technology (DLT) is a decentralized digital system that records information or data securely and efficiently across networks. It runs on a peer-to-peer network of computers, eliminating the need for intermediaries or central third parties, thus substantially reducing associated costs. The blockchain is a type of DLT in which all transactions are recorded on a digital ledger through cryptographically linked blocks of data immutable and visible to every node on the network. The blockchain also offers increased transparency and improved security due to its decentralized nature.
The advantages of utilizing DLT/blockchain technology in finance are numerous and far-reaching, ranging from cost-effectiveness and scalability to improved financial recordkeeping and greater trust within the industry.
DeFi: Transforming Blockchain in Fintech
Decentralized Finance (DeFi) is an emerging financial technology based on blockchain that reduces the control of banks on financial services and money. Over the decades, digital ledgers are also expected to experience a transformation in how money is sent, received, managed, and stored. DeFi is a financial system built on blockchain technology that operates outside traditional banking systems, allowing users access to various services such as loans, trading, and payments.
Here are some key implications for decentralized fintech:
- Increased Efficiency
Owing to its decentralized nature, DeFi does not rely on traditional intermediaries such as banks or governments and can thus be more efficient when executing transactions. The speed of these transactions can be improved further with automation.
- Improved Accessibility
Since DeFi frees users from relying on centralized entities, they can access these services and products anywhere in the world. This offers people more opportunities to access previously available financial products and services through banks or other traditional institutions.
- Lower Transaction Costs
The use of blockchain technology also eliminates unnecessary paperwork and transaction costs associated with traditional finance since the transactions are recorded directly onto the blockchain ledger without needing further verification or approval from a third-party intermediary.
DeFi has already started to reshape the way money is viewed with the help of cryptocurrencies, offering individuals greater freedom in how they manage their finances as well as improved accessibility and lower costs.
For instance, in February 2023, the cryptocurrency payments platform Wirex signed a long-term strategic global partnership with the leading global payments network Visa to expand into Asia-Pacific and the United Kingdom. Through the partnership with Visa, the London-based Wirex will be able to directly issue crypto-enabled debit and prepaid cards to users in over 40 countries throughout the United Kingdom, Asia-Pacific, the United States, and Europe. Wirex currently has more than 5 million customers worldwide, with its largest customer base in the United Kingdom.
How Is Blockchain Used in Fintech?
In fintech, blockchain technology can be used for various applications, such as tracking transactions, verifying identities and enabling secure financial transactions.
Some of the ways blockchain is being used in fintech are as follows:
Blockchain can be used to track transactions securely and quickly. By using smart contracts and distributed ledger technology, companies can verify the accuracy of transactions and ensure they’re conducted quickly and securely.
Blockchain can also be used to verify user identity and track customer information. Companies can use this technology to easily store customer data and access it when needed without relying on a third-party service provider.
Payments, Clearing, & Settlement
Blockchain can enable secure financial transactions across different networks. Many companies use blockchain-based platforms to make payments and transfer money more securely than traditional methods. This ensures that all transactions are secure, accurate and reliable.
According to Inkwood Research, payments, clearing, & settlement is anticipated to dominate the application segment during the forecast period.
Blockchain technology is a potential tool for fintech applications that helps businesses provide faster, more secure customer service. As more companies continue to adopt blockchain technology in their operations, the future of fintech lies in its potential as a secure platform for conducting financial transactions. The key to leveraging blockchain technology is understanding how to build the right infrastructure and ecosystems. It is therefore anticipated to unlock a new era of unprecedented opportunity, growth, and innovation in the global fintech blockchain market.
Who are some of the key players in the global fintech blockchain market?
International Business Machines Corporation, Circle Internet Financial Limited, Amazon Web Services (AWS), etc., are some of the key players in the global fintech blockchain market.
Which is the leading country in the global fintech blockchain market in terms of revenue?
Japan is the leading country in the global fintech blockchain market in terms of revenue.