Blockchain consulting company BlockchainArmy’s Chairman and Co-founder Erol User moderated a panel on Blockchain at the Bosphorous Summit in Istanbul, Turkey. One of the participants, Mark Mobius, an emerging markets fund manager and founder of Mobius Capital Partners LLP, showered praise on Erol User. The other panelists included Coinarmy CEO Peter Von Dam, UN Blockchain Expert Professor Massimo Buonomo, and Chairman of Microfund Foundation Professor Aziz Akgul. After the panelists had concluded their deliberations, Erol User gave an insightful speech on how the blockchain technology could revolutionize the financial sector.
Problems of Financial Sector:
The financial sector is plagued with delays, high costs, and cumbersome paperwork. The repetitive paperwork exposes it to fraud. 45% of financial intermediaries have instances of financial crime every year. Out of this, 37% impact the common man, 20% occur in professional services, and 27% in technology.
Growth of Blockchain:
It is estimated that blockchain could cut infrastructure costs in the banking sector, and security trading on the blockchain could go up to $15-20 billion by 2022.
Areas of Interest for Blockchain:
1. Fraud Reduction:
In the banking system, all data is centralized, which attracts hackers. Blockchain is a decentralized distributed ledger system, where multiple validators validate each transaction and prevent hacking & fraud.
2. Know Your Customer (KYC):
Though KYC norms are standardized, each bank collects and stores KYC records separately. With Blockchain, a single record of KYC data can be stored in one place. All banks can check and verify any user’s KYC credentials on the blockchain. A single KYC record reduces duplication and increases transparency. Data recorded on a blockchain cannot be erased or changed.
3. Trading Solutions:
The ASE and NASDAQ are exploring use cases for blockchain technology as its P2P model cuts out intermediaries, which increases transaction speeds and reduces the cost of transactions.
Smart contracts can be written on a blockchain for documentation of different functions like premium payment, filing claims, etc. This smart contract will execute once all the required conditions are met. The user can check on the blockchain to see the progress of his claim. A single record of documentation is visible to the insurance company and the applicant. It increases transparency.
Blockchain Technology is the Future:
Blockchain-related jobs have tripled on LinkedIn between 2017 and 2019. In 2019, $ 2.1 billion has been spent globally on developing blockchain solutions. Kevin Sherman noted that blockchain combines safety and security with faster and cheaper transactions.
Benefits of Blockchain:
1. Cheaper Banking:
With blockchain technology, parties on two sides of a transaction can execute the transaction on the blockchain and make payments instantaneously as no physical movement of fiat currency is required.
2. Instant Settlements:
Spot trading transactions take several days to settle. A blockchain can ensure instant settlements of spot trades as blockchain creates a P2P network that cuts out all intermediaries.
3. Optimized Usage of Capital:
Blockchain is a decentralized P2P technology, removes banks, credit cards, and other intermediaries, which reduce the cost of transactions.
4. Improved Adherence to Terms of Contract:
Smart contracts will make the whole system of filing and claiming transparent, which will reduce the chances of financial firms delaying payments, even after a customer has met all the requirements.
5. Range of Financial Solutions:
As each cryptocurrency token is priced differently, it is possible to create financial products to cater to a range of industries.
Blockchain technology can bring down infrastructure costs and bring transparency to the financial sector. Due to its immense potential, there is enthusiasm among the financial institutions for blockchain.