The future of finance is being fully transformed by blockchain
It’s anticipated that Web 3.0 adoption will pick up speed in the post-pandemic economy as a result of altered consumer behaviour and the requirement for higher system resilience. All eyes are on blockchain technology this year, as opposed to 2021, when the metaverse and NFTs first gained attention. Governments and corporations alike are increasingly depending on technology to unleash scalability in a cost-efficient and data-safe way and to create secure, decentralized ecosystems for increased user participation and empowerment.
The technology has seen intense investment from leading financial institutions all around the world. The use of blockchain technology is anticipated to rise at a rate of 46% globally over the next four years, according to industry estimates, with the financial sector driving this growth.
Promoting possibilities for growth
Blockchain is essentially a distributed ledger technology that is being embraced for financial and banking solutions that convert into seamless automation, data decentralization, and user-friendliness, which may cut through digital literacy levels. To combat KYC and ID fraud, share transaction information, and facilitate cross-border payments, the banking, financial services, and insurance (BFSI) sector is quickly implementing blockchain-based solutions in these critical areas. According to market estimates, the technology may reportedly save banks up to US$ 4 billion annually in operating expenses, just from cross-border payments.
Currently, technologies like Microsoft’s ION are assisting financial businesses, particularly fintech start-ups, to do away with the costs involved in constructing powerful back-end and front-end systems by creating secure peer-to-peer ecosystems. Instead, the sector can opt to prioritize customer interaction and product innovation, which will open up new markets and client bases while also allowing for higher penetration of current consumer groups.
This is expected to hasten the emergence of businesses and platforms that aim to match Amazon or Flipkart in terms of the quality of their customer’s experiences. Modern retail investors, particularly clients who are digital natives, need a tailored portfolio management experience. While profile-based suggestions and updates may be produced using technologies like AI and ML, blockchain applications like smart contracts have the potential to revolutionize how investors interact with their investments. To check if their investments match pre-established criteria, investors may log in from their phones and grant the necessary authority to handle their assets in accordance. Such democratization has the potential to advance both fintech and financial inclusion.
The Indian context
The opportunity is particularly important in a nation like India, where traditional investment preferences are giving way to newer habits as a result of declining interest rates on debt investments, surplus funds as a result of rising incomes, and a preference for a balanced debt-equity exposure as a result of ongoing global volatility. Additionally, India’s digital investment industry is expected to increase at a five-year CAGR of 22.4% to reach USD 14.3 billion by 2025, driven by its largest generation, millennials.
When effectively implemented with other Web 3.0 technologies in this context, the influence of blockchain can produce very fluid financial investing experiences. These may be attractive to elder investors seeking greater control and convenience in a growing investing environment outside of fixed deposits (FDs) and recurring deposits, as well as investors from semi-urban areas and urban millennials (RDs).
According to the 2019 Insights Banking and Finance Service landscape studies, organizations providing banking and financial services were targeted more frequently. Since the publication of the study, malware has been used more often to attack this sector. To safeguard the crucial information of millions of consumers and their hard-earned money, BFSI has to upgrade its cyber security system. The highest possible levels of data security and transparency are two of the major benefits that blockchain offers in a company environment that is becoming more and more digital-first. I think this is the fundamental aspect of the technology that will drive its acceptance throughout the BFSI sector.
Financial institutions are beginning to see the potential of blockchain after spending enormous sums of money each year modernizing outdated systems or transitioning to sophisticated hybrid cloud systems in their search for secure operations. Blockchain networks are confidential but not anonymous like bitcoin. This gives organizations total access to transaction information without running the risk of jeopardizing user identification or tampering with transaction data.
The success and speed with which governments develop and update legal frameworks for the technology will be a key factor in future blockchain adoption in India. Governments all over the world are already recognizing the potential given by blockchain to alter sectors and boost the economy, even though we will probably encounter quite a few obstacles along the way.
According to estimates, government-related blockchain initiatives in India would generate USD 5.1 billion in GDP in 2032. It is just a matter of time until firms figure out how to use blockchain’s untapped potential to create next-generation goods and services in personal finance, especially in light of initiatives like Digital India that emphasize building a knowledge-led society and economy.
Edited by Prakriti Arora