Impact of Blockchain on FinTech

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impact of blockchain on fintech
Blockchain technology by its very nature is secure, transparent, and traceable, which is why it is a perfect match for the FinTech industry. The FinTech segment, which was one of the first segments to adopt it, accounted for the largest segment at 38% of the global blockchain market in 2021.

What does Blockchain Change Across the Finance Industry?

For the payments industry, blockchain’s distributed ledger technology improves the efficiency of the payment processing system, increases transparency and traceability, and reduces operating costs. It increases transparency and reduces the need for middlemen in payment processing. Its distributed, real-time verification of transactions ensures high security of transactions and high transactions-per-second throughput. In the competitive cross-border payments arena, blockchain enables near-instant and transparent payments, eliminating complex and opaque fee structures.

In the banking sector, blockchain is democratizing finance. It enables individuals to manage their wealth without the need for a physical bank. Digital assets can be managed with the use of blockchain digital wallets. There were 80 million blockchain wallet holders in 2021. 
In the identity verification sector, blockchain has the power to eliminate intermediaries and disrupt the current financial ecosystem. Know-your-customer can occur as a single digital entry that can be cryptographically secured and distributed across the network, eliminating multiple entries and verification. It is set to make the ecosystem of banking, payment networks, lending marketplaces, asset managers, and regulators more efficient and lean.
Another redeeming feature of blockchain is that it is highly scalable. This makes it ideal for auditing applications. Irrespective of the size of the system, the blockchain acts as a repository of linear blocks that adds a new record for each subsequent activity. Auditing of all transactions can be done securely and quickly while ensuring complete transparency. 

Smart contract is another use case for blockchain that we had covered earlier. It uses blockchain to program a contract based on predetermined outcomes in a workflow. Accounting and finance firms can use them to automate invoices for more manageable accounts receivables, increase efficiency, and reduce costs and time spent.

All these use cases of blockchain technology in FinTech are gaining ground. The global blockchain technology market size was valued at $5.92 billion in 2021 and is expected to grow at a CAGR of 85.9% from $10B in 2022 to $1.4 trillion in 2030. However, a key factor for its growth and adoption is how blockchain is regulated across sectors and countries worldwide.