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In recent times, the world has seen changes in the financial niche with the advent of cryptocurrency and the fintech industry. Cryptocurrencies like bitcoin have seen their highs and lows, but they are believed to flourish in the coming years.
Fintech is an emerging technology with a vast umbrella of tools, solutions, and platforms. All of which are used to make the financial operations efficient and secure. The global market value of the fintech industry is expected to grow to 26.5 trillion USD by 2022.
FinTech – Definition
Fintech is a generalized term given to the technologies used to improve and digitize financial services. These include mobile and web-based applications, tools, and software, all with the same purpose of making financial processes more convenient.
The top fintech companies like Braintree, Morningstar, and Acorns have captured the market by providing the convenience of online financial services.
In the banking sector, fintech has provided online banking apps to the benefit of customers in checking account balance. At the same time, the bank itself is empowered with tools to conduct regular account monitoring of customers.
Evolution of FinTech
Fintech has actually come a long way if the details of the concept are taken into consideration. Even though the term itself is relatively new, technology was even being used for improving transactions when ATMs were invented. Recently, however, fintech has become a necessary part of well-established financial institutions.
Speaking of the situations where fintech has been useful, there was no hindrance for customers during the coronavirus pandemic thanks to online banking and payment apps.
Cryptocurrency & Fintech
The impact of cryptocurrency is clear from its adaptation in businesses. As market trends show the growth of small businesses on the basis of trade in digital currency, and already established businesses are also realizing the security and speed of crypto transfers.
The development of cryptocurrencies like bitcoin is intended for use in the fintech industry. Cryptocurrencies are becoming increasingly popular in the regions of the world where their actual currencies are not so stable or worthy.
Efficient Money Transfers
The adoption of digital currency raises issues in some cases due to lack of trust in online transactions, but it’s now gaining market interest as more and more people are considering it a stable and reliable currency.
It’s not difficult to understand the power of cryptocurrency when considering the population of the world, all of whom are using mobile phones. Cryptocurrency is decentralized, and not requiring customers to physically go to banks has provided quite the facility, as everything can be handled via mobile applications.
In this way, cryptocurrency opens up an array of opportunities for fintech companies, as people who are already used to making financial transactions online will not prefer to use the traditional financial systems anymore. The traditional financial systems cannot provide the speed and efficiency that cryptocurrency provides because of delays and several official requirements.
Reducing Fraud
Fintech companies face the risk of identity fraud just like other institutions. It’s considered to be a time-consuming task to implement strategies to reduce or prevent fraud.
Cryptocurrencies provide an online platform where transactions are verified, and records are kept safe using blockchain technology. Manipulating and obscuring these records is not possible, and therefore, fraud can be prevented with less effort.
Blockchain – How Cryptocurrency Works
Blockchain technology provides a specific decentralized and secure storage of information that prevents hacking, theft, and tampering of data. The data is stored in the form of interlinked blocks that aren’t controlled by any single entity.
The groups or blocks are joined to new blocks when the maximum storage capacity is reached. Considering transactions, blockchain allows a record of each transaction to be stored in the particular individual’s ledger.
A complex process that starts with a peer-to-peer network making calculations to validate the transaction. This is followed by the storage of transaction information in blocks. Permanent detailed information is chained together to store the complete history. If you need a more in-depth understanding of fintech and cryptocurrency, consider taking a fintech bootcamp. These will offer more technical information and provide you with a deep understanding of the backend so you can understand how these products really work.
Advantages of Cryptocurrency
Cryptocurrency is being used in various industries as payment, like restaurants, airports, and many mobile services.
Ease of Access
Customers find it an easily accessible way of payment as compared to the banking system. They simply do not have to rely on banks, thanks to the decentralized nature of cryptocurrencies allowing them to send and receive payments using their smartphones.
Additionally, those customers that face difficulty in using bank accounts are provided with the opportunity to benefit from a wider range of services.
Smart Contracts
Cryptocurrency is also applied in smart contracts, where blockchain technology ensures the facilitation of terms and conditions. The legal contracts are far more secure with blockchain as the cryptocurrency is transferred safely from client to client.
Cryptocurrency and The Banking System
Security Concerns
The security provided to customers using cryptocurrency can be improved with the help of banks. Established banks can help customers by providing secure digital currency transfers, thereby preventing hacking and theft. In addition, the merger of cryptocurrency and banks can greatly reduce or eliminate criminal activity in payments and transactions.
AML/KYC
Even though cryptocurrency transfers do not follow the regular banking procedure, they still have to comply with KYC/AML guidelines. These guidelines can help avoid illegal transactions or scams in cryptocurrency by conducting customer due diligence, reducing the risks involved.
Also, blockchain technology can help in enhancing the efficiency of AML/KYC, document verification solutions, and streamline the data for banks, their customers, and other entities involved. To put it simply, blockchain can store the data of all the customers and help financial institutions in keeping an eye out for criminal activity.
Final Word
To sum it up, a large percentage of the world’s banks are already considering the possibilities of cryptocurrency in the central monetary systems. It’s quite obvious that fintech and crypto have dominantly affected the world and bring many positive opportunities as well as providing security to customers.
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