Bitcoin is primarily a medium of exchange that would replace the existing monetary system. Owing to the low transaction fee, non-requirement of a third party and ease of transaction it is being looked as a really good alternative for fiat currencies. Bitcoin powered by ledger based technology, enables the transactions to be peer to peer and anonymous. Ironically the ledger based technology is finding applications in the field of financial services. The transformative potential of Blockchain technology has made it very viable for quick adoption in many sectors. Let’s look into how Blockchain is transforming fintech:
Blockchain in Trade Settlement:
One of the most important aspects of Trading is the settlement of trades and the balancing of money. After a trade, it would take sufficient amount of time to cross check the trades and validate them. Transfer of funds to the stake holders’ accounts takes place on completing the validation, . Typically this process would take atleast 12-28 days with the money held up during this period.
This would be loss of investment opportunities and Blockchain technology has a solution for it. CEO of overstock.com Patrick Byrne, introduced ‘Tee zero’ a securities trading platform that drastically reduced settlement time for equity trading. The platform banks on Blockchain technology and has great flexibility in trade dealings. Major banks have been working on a similar platform for credit card settlements and operations.
Blockchain for cross border transactions:
Cross border transactions have a long wait period before yielding to utilizable value. Cross border transactions across banks are no exception to this. To avoid the exposure during this wait period banks opt for multiple hedging strategies.
US based startup R3, along with 12 global banks, created a cross-border payment system. Financial technology company Ripple developed this system, totally powered by blockchain technology. This alliance was able to successfully complete testing of transactions over this network and is soon to put this into application.
Blockchain for Mortgage valuations:
Hong Kong banks are reportedly developing a system that uses blockchain tech to share information about mortgage valuations. Bank of China and HSBC are among a group of lenders in the region that are testing the system. If fully realized, the system will include participants from Hong Kong, who will contribute valuation data. While the system is still under testing, the proposed mortgage valuation system looks promising. Bank of China will be integrating live inside their operations sometime next month. This is set to change the face of mortgage valuations and ease the operational burdens on the banks.