How Blockchain Technology Is Revolutionizing Financial Services

What is blockchain technology? 

We’ve all heard the term “blockchain” mostly in association to cryptocurrency, but what is blockchain technology, and how does it benefit financial services as a whole? 

Blockchain technology is a decentralized, distributed, digital ledger. 

Decentralization: There is no sole authority or “point” person.  

Digital ledger technology: Distributed ledger technology is a system of recording transactions in multiple places at the same time. It is an interconnected information system operating on various networks. If one network fails, it can still function. Data on the blockchain is highly secure and unable to be modified. 

Why is blockchain technology beneficial to the financial services industry?   

Security: One of the primary benefits of blockchain technology in finance is its highly secure nature due to its decentralization and distribution. Since there is no point person, it’s much more difficult to hack.  

Real-time transactions: Additionally, blockchain allows for faster payment processing and sending. It provides real-time payments with no human error interference and decreased fraud potential. 

Automation: Blockchain technology provides a single source of data, rather than an exchange of multiple documents, transactions and communications between multiple parties. This results in increased customer privacy and a decreased need for human errors.   

How does blockchain create opportunity for investors? 

One of the biggest upsides for investors is that blockchain reduces the costs of trading and investing. Fewer people involved (no middle-man) means fewer people needing to be compensated during the process. Blockchain could produce a much faster, efficient, and cheaper banking process. 

In addition, because data is so much more transparent, investors and advisors’ relationship should benefit as well. No more extensive documents, paper trailing, and risky data shared via email or phone call.  

Lastly, blockchain can help make investing in alternatives much more simple and accessible. Distributing funds among multiple parties becomes nearly instantaneous, and the elimination of the middle-man results in significantly lower fees for investors and better rates of return.  

Overall, blockchain technology provides a digitization opportunity for almost every aspect of financial services, from quicker transactions, higher security, less human interference and error, and lower operating costs. 

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