What is blockchain fintech?

by Anii Jain Human resource executive

Fintech is a much-hyped buzzword in the financial services industry these days and everyone from the corporate giants to the infant startups is talking about it. Though Fintech is gaining this attention for all the right reasons, its specific meaning always gets diluted along the way. It is proclaimed to be a game-changing, disruptive innovation that holds the capability of shaking up the traditional financial markets. This blog aims to clearly define what is Fintech and how Blockchain technology is driving disruption in the financial services industry.

What is Fintech?

Fintech, an abbreviation for Financial Technology that describes the evolving intersection of financial services and technology. The term Fintech was originally referred to the technology applied to the back-end of established consumer and trade financial institutions. Since the internet revolution, the term Fintech stands for technologies that are disrupting traditional financial services, including mobile payments, money transfers, loans, fundraising, and asset management. Although in its broadest sense, Fintech stands for technologies used and applied in the financial services sector, it also touches every other business the financial services industry deals with.

Every time you go online to see your financial transactions or use tools to manage your spending and investments, you are making use of financial technology or Fintech.

Another most hyped term in the financial world today is Blockchain. Blockchain plays a significant role in financial innovations and is the backbone technology that is driving the Fintech revolution.

Everywhere you look these days, someone has a crazy new solution built off of Blockchain technology and you may be asking yourself this question: What does Blockchain mean, and how is it relevant to me? If you are an investor, entrepreneur, government worker, teacher, or well anyone who is collecting a paycheck, then this is the most important advancement to date, of any kind. It will have significant consequences on our lives and how we do business in the future.

Defining Blockchain

A Blockchain is a type of decentralized and distributed ledger for maintaining a permanent and immutable record of transactional data in chronological order. Blockchain stores transactional data in a continuously growing list of records called blocks. Blockchain uses cryptography to link and secure these blocks. Each block typically contains three elements:

A Hash pointer- link to the previous block
A timestamp
Transaction data

For better understanding, the key features of Blockchain can be categorized as follows :

Decentralized

Distributed ledger

Immutable record

Why Fintech needs Blockchain?

The biggest challenge a Fintech company face is trust. How to make people trust them, and how to make a safe and secure financial product? Banks and financial institutions have huge cash reserves using which they create secure networks on which banking transactions take place. Fintech companies lack funds which restrict them from developing or procuring a high-security system.

Enter Blockchain. Blockchain is cheap in terms of developing and also highly secure or “trustless” as we call it. As Blockchain is a series of immutable blocks, this allows companies to track the complete lifecycle of a financial transaction. Blockchain has given the opportunity to create secure and safe financial products and bring innovation in the financial sector.

Blockchain has the potential to truly disrupt multiple industries and make the processes more democratic, secure, transparent, and efficient.

Future of Blockchain Technology in Fintech

Although the Fintech industry is thrilled about blockchain, the technology will take a few years to become a mainstream financial model. As with any emerging technology- Blockchain poses certain challenges that need to be addressed to fully utilize its potential in the financial services industry.

It is obvious that even though Blockchain technology is still in its growing phase and the possibilities are still being explored, it is important to research and keep up with new developments to make the best use of this technology to fully transform how we carry out our financial processes in our day-to-day life.