Blockchain – the New Wave in Fintech and Retail Industry
Blockchain is revolutionizing FinTech and Retail. While this may seem a general statement, let’s quickly look at some statistics that prove the rate at which blockchain is promulgating across both these realms.
Let’s start with FinTech. According to Statista.com, in 2018, blockchain’s use in banking was USD 0.28 billion. But with an almost 100 percent rise every year, the technology’s use escalated to USD 1.46 billion. This year, it
Blockchain’s use in retail also is abundantly promising as well. According to stats published on Allied Market Research, blockchain had a modest value of USD 83 million in 2018. However, the technology is expected to be valued at USD 11.18 billion by 2026, with a CAGR of 84.6 percent from 2019 to 2026!
(Source – https://www.alliedmarketresearch.com/blockchain-in-retail-market#:~:text=Blockchain%20in%20Retail%20Market%20Statistics%20%2D%202026,84.6%25%20from%202019%20to %202026.&text=These%20factors%20drive%20the%20market%20growth%20for%20blockchain%20in%20retail%20industry.)
Now, that’s interesting, convincing and promising, isn’t it? But for a business owner, irrespective of whether from banking or retail, at the individual level, what will matter more is how will blockchain benefit his business.
And that’s obvious, as every technology should carry some strategic and commercial benefit with it to make it a name every business relates with. So, here’s a blog, which is an excerpt of an interview with one of the higher officials of Qodequay Technologies. It highlights how blockchain will benefit FinTech and retail in the future.
Interviewer: Why should FinTech players adopt blockchain?
The first benefit is that blockchain helps reduce operational costs for a bank. It does so by improving capital optimization. It eliminates the need for intermediaries such as custodian banks (that facilitate bank to bank money transfer) or clearers. Of course, these intermediaries come at a cost borne by the bank. But blockchain makes peer-to-peer transactions possible. So, while a bank will have to invest in blockchain, the investment cost is significantly less compared to the fee per transaction that banks pay intermediaries.
Additionally, blockchain reduces counterparty risks. It settles transactions instantly and removes a considerable part of the risk that the counterparty cannot meet its obligations. This risk is an expense for the bank. Blockchain eliminates it!
Another aspect is that of smart contracts that enhance contractual term performance. Smart contracts are executed automatically when some pre-conditions have been met. For banks, this proves beneficial in the case of complex financial transactions. Settlement happens automatically through smart contracts. It eliminates the chances of deviations, the possibility of which may be high when a settlement is done manually.
Now, let’s look at the benefits from the customer’s perspective. The first advantage is that of instant settlements. Currently, settlements can take up to a week. However, blockchain facilitates user-oriented settlements which save time and money for customers and banks.
So, on the one hand, where customers enjoy quick settlements, on the other, banks save money by eradicating the need for middle office or back-office staff, the employment cost of which is paid by banks.
Lastly, I’ll say, blockchain reduces manual errors and improves reconciliation. That’s because every data recorded in a block is unchangeable. Additionally, you can record data in real time and have an audit trail for every transaction recorded on the block. So, everything remains transparent for regulators to review, should they have access to blockchain.
Interview: How will Retail players benefit from blockchain?
Blockchain addresses one of the most prominent pain areas of the retail sectors and that’s transaction settlement. Retail payment providers take quite a long time to settle transactions and charge a significant amount of money for it to the retailers. But blockchain payment applications expedite the transaction settlement process at a much lesser fee with better security compared to credit cards.
Another area of benefit is payments made in cryptocurrency that eliminate the worries of currency fluctuations and therefore the losses that either of the parties or both incur due to it. When both the parties use cryptocurrency as the form of payment, no currency exchange takes place and therefore, there’s no loss as such as that they bear. As a matter of fact, this can be applied to supplier payment and those of consumers.
Although indirect, blockchain offers benefits to consumers as well. It refers to the use of blockchain in the retail supply chain. Blockchain enhances supply chain visibility and transparency. It allows for the authenticity of raw materials like proof of Fair Trade and Organic Goods.
Further, it also enables people to know the source’s authenticity and helps combat counterfeit goods. So, consumers would rarely get counterfeit goods in their hands. Although the intention would always be to completely eliminate the entry of counterfeited goods in the supply chain.
In a nutshell, whether it is consumer payments, supplier payments, or international payments, blockchain paves the way for quicker processing, a higher degree of security and considerable cost-savings. And, that’s precisely, where blockchain is more than just a wave. It is the future!
Interviewer: I have heard about the concept of NFT? How is it beneficial?
NFT stands for Non-Fungible Token. Fungible is something that cannot be replaced or replicated by anything similar. Likewise, NFTs are cryptographic assets on a blockchain with unique identification codes and metadata that differentiate them from one another. However, unlike cryptocurrencies, you cannot trade or exchange them at equivalency. That’s the basic difference between cryptocurrency and NFTs. Cryptocurrencies are identical to each other and can be used for commercial transactions. But you cannot do it with NFTs.
Now, speaking of NFT’s benefits, perhaps, the most apparent benefit is increased market efficiency. NFTs refer to converting physical assets into digital ones. That helps streamline processes and eliminate intermediaries.
But the advantages of NFTs transcend business. They also prove useful in the case of identity management. For instance, currently, every individual traveling abroad has to produce his/ her passport at every entry and exit point. Converting every passport into NFTs can help streamline entry and exit processes for every territory.
Interviewer: Is blockchain sustainable for FinTech and retail?
Of course, it is! At least with the benefits it brings to the banker and retailer’s table, I see it as a sustainable form of technology. The most important attributes of blockchain that make it sustainable include its security, immutability, ability to process transactions quickly, ensure faster settlements and save a lot of administrative, backend and intermediary-related costs. I wouldn’t be surprised if blockchain becomes the fundamental norm everywhere in the years to come.
Interviewer: Isn’t blockchain a disruption? If that’s the case, why should business owners adopt it?
Every technology is a disruption. Computers were a disruption to typewriters. But with a few years of initial glitches, everything fell into place. Similarly, blockchain is a disruption. But I’d say it is a positive one. It may render some people jobless, especially the intermediaries. However, every technology has some or the other impact on the world. So, how can blockchain be an exception to it? But it is about aligning yourself with emerging technologies and becoming a part of it, rather than staying aloof.
For FinTech and retail, blockchain is a disruption to the conventional workflows. Hence, the adoption of blockchain may not necessarily be a cakewalk for FinTech players. But many have done it, succeeded and benefitted from the blockchain revolution. Here, the decision-makers will have to sell blockchain’s benefits to their teams to encourage adoption, training and implementation. After all, money saved is money earned. And,
if blockchain does that in the long run, I’d rather ask, why should business owners abstain from adopting it?
Adopt Blockchain with Qodequay Technologies!
Moving to the blockchain requires you an expert guide to handhold you throughout the process. Qodequay Technologies is precisely the group of professionals that will simplify your journey to the blockchain. The company customizes its blockchain solutions to help you blissfully and effectively upgrade your existing workflows to the blockchain and optimize its benefits. To know more, write to firstname.lastname@example.org.
The New Wave in Fintech and Retail Industry