It goes without saying that new and emerging technologies have revolutionised solutions in the finance industry — from mobile apps eliminating the need to visit banks, to stock trading apps that let investors make a profit at the tap of their finger. But if there’s one fintech solution that stands out from the fray, it’s the blockchain.
Originally met with scepticism from banks and governments alike, the groundbreaking technology is slowly providing the finance industry with opportunities for safer transactions. Its decentralised nature and transparent network infrastructure give it a high level of speed and security, along with low operational costs. These characteristics prove that not only is blockchain technology reliable, but it’s also cost-efficient — an attractive factor for banks and investors.
But how exactly will blockchain disrupt bank processes and solutions?
Although it’s best known as the technology that makes cryptocurrencies possible, our fintech correspondent Josh Wardini points out that there’s a lot more to blockchain than that. The incorruptible chain of data can serve as a secure network for other applications, such as sending and receiving important messages to a trusted ecosystem, or even storing and accessing data on physical or digital assets. These examples are only the tip of the iceberg when it comes to the many possibilities that banks and fintech firms can implement.
Case in point: IT subsidiary Tech Mahindra is poised to launch a blockchain financial management and insurance solution — the first of its kind here in India. This will help customers save USD 4 million for every USD 1 billion of financial risk management and banking relationships, as error, fraud, and double data entries can be avoided.
Cross-border payment transactions between Southeast Asian countries and international businesses can also benefit from blockchain technology. In fact, earlier this year, the Ubin-Jasper project by the Bank of Canada and the Monetary Authority of Singapore conducted trials of cross-border payments using blockchain technology to combat the current slow, risky, and costly system. Despite being successful, foreign-exchange rates and transaction fees still remain an obstacle. On a strategic level, however, the Ubin-Jasper project has built a foundation that proves that two blockchain networks can interoperate, allowing transfers across two different digital networks.
Although blockchain technology has proven to be beneficial so far for the finance industry, the rest of the Asian region is slow to respond — but that isn’t to say that they aren’t catching up. The Central Bank of the Philippines is already looking at blockchain solutions for traditional banking and wire transfers, as well as central bank-issued digital currencies. This is to pave the way for faster and more efficient transactions between bank clients. On the other hand, other countries who raised regulatory concerns in the past few years have begun cautiously approaching blockchain technology. For instance, Thailand recently launched regulatory sandboxes for fintech companies to test their blockchain systems under the supervision of regulators.
On the whole, blockchain technology is still in its infancy — it will still take several more years before it reaches the pinnacle of productivity, adoption, and implementation that its developers aim to achieve. Fortunately, its popularity continues to inspire interest and motivation to find new applications for it in all aspects of finance. And as institutional support increases and regulations are established, the legitimacy of blockchain technology in all industries will only deepen.