How is blockchain technology affecting the financial ecosystem?

The transformation and increased digitization of the financial sector has been the hot topic of the recent years. The hype around it does not seem to go down with new disruptive developments constantly being introduced to the market. Among them is blockchain or Distributed Ledger Technology (DLT), which has caused a lot of discussion, concerns and opinions from the side of users, companies and regulators. Some claim that the future of digital banking is directly connected to the pace of Blockchain’s development.

A traceable and universally accepted currency would not only change the way banking services are provided, but also lead to massive cost reductions. It appears to have already disrupted the fintech industry, capturing the attention of financial institutions around the world. The number of patents filed in the last three years surpasses 3,000, which has attracted more than $1.4 billion in venture capital investments.

The Peer-to-Peer ecosystem, powered by the technology of Blockchain, is what facilitates the evolution in the financial ecosystem, creating new ways for doing the well-known operations. The future of banking and finance will be manifested with instantaneous confirmation of transactions, elimination of intermediaries, boosted efficiency and lower transaction costs. The main confirmation of this claim is the support and adoption of blockchain technology by most of the central banks worldwide.

The distributed ledger technology, powered by Blockchain, will enable the instantaneous trading of fixed and equity income, currency settlements and other financial services. This will revolutionize the banking sector, leaving the institutions that failed to integrate the technology behind and driving the operational efficiency forward.

Blockchain allows for the transactions to be stored in a public repository ledger, which is organized in chronological block of chains. All the participating users of the system, along with the traders, have open access to this chain. This powers the autonomous execution of transactions and ensures full transparency.

The impact of such technology on the future of the banking industry cannot be overestimated: bulks of unnecessary paperwork and lengthy waiting times are expected to disappear in the next few years. Most importantly, such optimization will lower the cost of transactions, while speeding up the execution process.

Compliance will also undergo significant improvements thanks to the simplified and more efficient authentication and verification procedures. Adherence to the respective responsibilities of an agreement will no longer be questionable with the blockchain smart contracts, which create automatically binding obligations.

At last, the distributed ledger technology also enhances the value proposition of financial companies and services providers, as dispute resolution and records reconciliation are optimized, transparency is enhanced, and insights become accessible to all parties of an agreement. This results into better pricing mechanisms and credit adjudication.

In a nutshell, in the next few years we will witness blockchain reshaping the usual frameworks and bringing more transparency into the financial ecosystem. The changes will affect all stakeholders – regulators, users and companies themselves, urging the need to increase cooperation on the issues that matter and resolve possible conflicts of interest.