Blockchains and the world of finance go together like two pedals on a bicycle. The success of cryptocurrencies and specifically Bitcoin, all come back to the invention of blockchain technology. But this is not the only use for blockchain technologies in finance, the Fintech industry is flourishing thanks to these tech advancements.
Take a crash course on this exciting tech and Fintech below before discovering the ways that blockchain is changing the industry.
What is a Blockchain?
A blockchain is a digital record of transactions, usually with a timestamp and other meta information. These transactions can be financial or otherwise. The best way to think of it is quite literally a chain of blocks, with each block a piece of information. But storing data in this way is not unique.
The reason this technology is so revolutionary is that it cannot be altered. Using complex maths and security, nobody can change the information stored on a Blockchain. Blockchain cryptocurrencies are most well-known for their role in powering crypto like Bitcoin. Each Bitcoin transaction is recorded on a decentralized blockchain. But remember that blockchains are standalone technology. Although Bitcoin cannot function without it, blockchain can be applied to many other uses.
What is the Fintech Industry?
The word Fintech is coined from two other words, namely ‘Financial’ and ‘Technology’. Thus, Fintech refers to technologies that improve the financial services industry. For example, if you created an app to send and receive money across borders, the app would be classed as a Fintech development. This industry has grown with lightning speed over recent years. The Global Fintech Adoption index citing 100% growth year on year since 2015. It hasn’t gone unnoticed among investors either, with increased spread betting and investing in Fintech companies on the rise.
How is this Tech changing Fintech?
Putting Bitcoin in a draw for a moment, how have Fintech companies and the wider public benefitted?
- They’ve increased security – it has become more difficult for financial fraudsters and criminals to target businesses and their clients.
- They’ve reduced barriers to cross-border transfers – more companies are creating products and services to support a global financial market, such as making it easier to send money abroad.
- They’re speeding up credit applications – blockchains that store credit history information allows lenders to grant funds quicker, reducing hold-ups on personal and commercial projects.
- The increased use of this new technology is causing financial industry regulators to adjust laws and guidance at a swift pace.
The innovation around blockchains is expected to grow in the next decade. And could soon be an integral part of all banking institutions across most of the world by 2030.