FinTech has always been founded on the notion that traditional ways of doing business don’t work. There has to be an innovation that drives the sector. There has to be a value proposition that spikes customer’s interest. From now on, the money has to be secure, easy to manage, and available from anywhere and at any time. The FinTech blockchain market makes it possible.

Blockchain and cryptocurrency in FinTech

The ways blockchain cryptocurrency is disrupting the Fintech sector

FinTech and blockchain. These words are not necessarily synonyms, since not all finance products run on or even utilize this technology. But Bitcoin, blockchain as a whole, significantly improves the market.

Today there are over 4.000 cryptocurrencies out there. People from all walks of life and with different needs can choose the product and entrust the company behind it with all their money. It’s a capital that can’t be ignored or taken lightly. That’s why companies are creating solutions to strengthen the bond between the product and the consumer.

Cryptocurrencies create a digital ledger. Time-stamped and recorded transactions that can be stored and screened chronologically are one of the biggest values of this technology. Companies and regulatory bodies can trust the entire lifecycle of money. 

People and firms can easily prove transactions and money flows. Both in the short and long term. Having accurate records of what is going on in both private and company accounts is invaluable. Where does the money originate from? How, when, and by whom it’s used? How long does it stay in the account? What parties are involved in the flow? These are questions that improve transparency.

FinTech and blockchain remove third party’s involvement. Many blockchain finance startups go with the message that no additional company is involved in what you do with your money. No go-between can impact your rent, loan, or insurance application. Partly because there are no applications left. Almost everything is now processed through machine learning algorithms

Plus: no money flows validations, no external processing. Everything within the app.

Blockchain in the FinTech market made a crackdown on crime. Money laundering is a serious concern in the finance sector. So big, in fact, that in some cases it’s easier to break into a cryptocurrency wallet than into a real bank. All you need is a private key from someone who owns another crypto account. We have talked about it in our previous article: How Does Blockchain Work?

Today’s combined cryptocurrency market cap is worth over $2.2T. It’s an enormous amount of money. Because the nature of blockchain is decentralized, it has never been hacked. Although few people stole Bitcoin and other cryptocurrencies from digital wallets, the network itself is considered secure. Because every transaction is put on display for public view, nothing gets past the community.

Cryptocurrencies give the voice to the unbanked. Democratization of money management is a big achievement. Especially in Africa and other places where neobanks can thrive. There are people with an income so low that they can’t afford the services of traditional banks. Or their physical branches are not within walking distance. Or even driving distance, since the infrastructure is in poor condition. That’s why blockchain finance startups are introducing products to help financial minorities to decide for themselves. 

The digitization of financial instruments impacts everyone

Because blockchain is scalable, it offers many business benefits for all actors of the FinTech market. All: customers, companies, and investors can feel satisfied with the quality open banking layer of apps, services, and returns on investment. 

The economic benefits include automated and more efficient business processes. Like customer onboarding, which is an important part of the customer FinTech experience. Blockchain reduces operational and transaction costs. 

Security on autopilot. Data privacy, compliance issues, identity check, and the governance of business operations can be put on programmable application modules. 

Faster decision-making. Data processing, transaction auditing, and authority reporting can now be done faster and more efficiently. When there’s a money flow, there’s a paper trail. Or should we say: a bit trail.

Direct customer feedback and improvement of services. Because the network is dispersed, it’s more secure. Because it’s more secure, it’s less time-consuming in terms of management and daily maintenance. That makes the customer the center of operations. It’s the front-end that matters the most.

FinTech blockchain use cases are vast

Blockchain is fairly easily applicable to FinTech applications. Because there are many solutions and currencies to choose from, every product can be taken care of. Does blockchain need Bitcoin? No. But when the question is reversed, the answer is nearly always “yes”.

Insurance. Processing of claims can speed up, contracts can become more personalized and parametrized at the same time. More options, more individual care, and human touch. People are leaving high-street banks for open banking because FinTech offers them experience, not only services. 

Banking and loans. Prediction of credit rates and establishing a credit score for application users becomes easy and secure. This is vital information for anyone involved. Using a secure network to protect the data is appreciated by customers.

Market management. Sales and trading, asset management and servicing, post-trade services, clearing, and settlement, issuance. This is what is possible or easier with FinTech and blockchain. 

Stock exchanges. Real-time settlements mean smoother buying or selling and instant money in your pocket. Bottlenecks no longer come from technological flaws and mismanaged and underfunded platforms but from regulatory approvals and mandatory, sometimes country-wide clearances. Users are free from high broker costs and can save or invest at their own convenience. 

Trading. Smart contracts do the job here. The overwhelming load of paperwork requires forms, letters of credit, and other ways of proving clear intentions and securing money flows. With Bitcoin, blockchain, and other cryptocurrencies and sub-technologies, everything is in place for smooth operations. 

Accountancy. Every action (debit entry in any given register) has to create a complementary reaction (credit in a second register). Record entries and tallying are tiring and costly. In traditional accounting, everything has to be manually fact-checked and rectified. Machine learning improves data integration and lowers costs. Especially for the InsurTech sector. 

Blockchain in FinTech is so valuable because its architecture prohibits double-spending. Classic ways of doing business require multiple records for the same transaction. Most of the time they are incomplete or at least fragmented and definitely not free of human errors. FinTech and blockchain go hand in hand in providing quality. 

Crowdfunding. Investors can purchase tokens instead of shares. It simplifies the process of investing and provides companies much-needed cash. In the past, these tokens were not considered a form of currency or bonds, thus escaped regulatory oversight. Now, they are regulated by local bodies like the United States Securities & Exchange Commission.

Blockchain in the FinTech market – 2021 and beyond

Making predictions for the future is a risky business. There are, however, some trends and facts that can lead us towards sane conclusions. 

Geographically, North America leads the global FinTech blockchain market. It has the largest market share, revenue-wise. Europe is diverse, with Great Britain as one of the major hubs for the sector. Africa in large part serves local communities, capturing the audience living and working in certain countries, rather than continent-wise or internationally. Asia, with China and Singapore at the helm, lead the charge in terms of innovation and new business models.

The Asian market is expected to grow exponentially and to have the highest percentage of compound annual growth rate (CAGR) from 2021 to 2027. The blockchain-as-a-service market is expecting to grow, forming new technological advancements and business models. An identity management application should grow in numbers. Partially due to the COVID-19 pandemic but mostly to prevent fraud.

Blockchain and cryptocurrency as a whole should be widespread in the FinTech world in a few years, making it even harder to launder money or create a false basis for a positive credit score. 

Blockchain cryptocurrency is the future

Blockchain and cryptocurrency have the potential to revolutionize audit trails, automated contracting, and the microservice economy. In many fields and ways, it already does. It’s an innovation that is aligned with objectives, and that many companies and users alike look for.