© PopTika/Shutterstock.comBecause of all those benefits, blockchain has the potential to disrupt the financial industry. Financial, banking, and insurance companies considering implementing blockchain must understand its value and strategically position it in their digital infrastructure. FinTech fills a knowledge void that enable banks and financial companies to advance a well-planned approach that focuses on needed applications and technologies but does not disrupt the banks or financial companies’ focus on their core businesses.
Blockchain will provide benefits most readily to currency funds, capital markets, secondary market trading, and post-trade settlement processors. It will also help eliminate logjams, audit issues, and security concerns in payment and remittance streams, regulatory compliance requirements, securitization, and personal data and identity management. The greatest benefits across all the use cases in the future of blockchain lies in its transparency and its immutable architecture that eliminates manual processes and automates repetitive functions.
When considering partnering with a FinTech company to develop a strategic blockchain and application plan, some important questions to ask and answer include these:
- Is there any component in your business that would benefit from a decentralized data structure?
- What are the benefits for your business?
- What are the costs and potential risks?
- How will blockchain disrupt your business processes, both internally and externally?
- How does blockchain fit within the bank’s risk management system?
- Are there any early adopters in your sector that are successfully utilizing this technology?
- What are the long-term objectives for deploying blockchain technology?
- Is there a way blockchain will expand the organization’s reach to new markets?
- What are the short-term wins?
- How does blockchain fit with other technologies the organization currently needs, such as cloud, microservices, and application programming interfaces (APIs)?
A FinTech company should do a current, complete assessment of the state of the organization. After that analysis, it should be able to produce a phased plan for rolling out the needed technologies that demonstrates an understanding of the company’s strategic needs. The plan should offer a holistic approach to replacing and integrating current systems and should present significant use cases for future enhancements. The plan should include steps for addressing legal concerns and regional governance issues and should provide a transition and support plan for making changes to the blockchain network.
In some instances, the banking industry has been racing to advance or adopt some cryptocurrency strategy. Because no regulatory agency governs these currencies, banks have an opportunity to engage and set their standards and their own financial regulatory controls. Cryptocurrencies offer many benefits to the banking industry, like lower transaction costs.