Bridging the Future: How Tomorrow's Finance will be Built on Blockchain and Borderless Transactions
According to The World Economic Forum, 10% of global GDP is set to utilize blockchains or blockchain-based technology by 2025. This is an astounding figure for a technology that emerged alongside the arrival of Bitcoin as recently as 2009. From the development of intricate cryptocurrency networks, blockchain has evolved to become rightfully recognised as the driving force behind the future of fintech, and a solution for delivering borderless transactions.
Blockchain transactions come with many advantages over traditional financial services, including factors like:
Eliminating processing fees
Quicker processing speeds
Bypassing the risk of duplicate spends and false-positive failures
Better protection from falsified transactions
Protecting against the risk of data loss via ledger copies
Digital payment transactions can be applicable across multiple domains and situations. For instance, payments can be managed throughout supply chains for retail businesses and automated inventory management programs can broker instant international digital payments for order processing across many different vendors.
In such scenarios, blockchain-based transactions can help to reduce manual workflows and the process of individually approving each payment made.
Here, it’s also worth noting that the term ‘transaction’ can refer to more than just the transfer of money. In many business cases, transactions involve lots of manual processes. For instance, in the example above, the monitoring of stock for employees can be a time-consuming process that leads to wasted working hours that can be better invested elsewhere. With more effort being exerted in brokering transactions, human error can lead to partner agreement oversights and potentially even duplicate transactions being made.
As the chart above shows, we’re now positioned in an era of accelerated adoption of blockchain technology. This means that blockchain is in a position to be onboarded as a tried and tested means of improving the performance of an enterprise.
It’s fair to say that blockchain can be a particularly powerful tool for companies with an international reach or a supply chain that extends beyond borders. With this in mind, let’s take a deeper look into this highly disrupting technology and how it can improve both business and finance beyond borders.
The Building Blocks of Modern Finance
Not all blockchains behave in the same way. Depending on the blockchain network that you’re utilizing, external parties may be capable of seeing prior ledger entries and they could have the ability to create new entries themselves - however, many blockchains can utilize elaborate requirements for the addition of new records, better known as ‘blocks’, onto the chain of records.
The blocks, and the information they hold, cannot be tampered with, deleted, or destroyed in anyway. Thanks to its powerful cryptography, blockchains can ensure that digital currencies like Bitcoin remain fully trusted within a network without the need for a central authority - like a bank or regulator - stepping in. It’s for this reason that we call blockchains ‘decentralized’.
As the table above shows, the distributed nature of a blockchain means that transactions generally need to achieve a consensus across the network before they’re executed - meaning that for tampering to take place, a hacker must manipulate a dominant percentage of blocks across far-reaching locations for a change to take place, a virtually impossible feat.
Although blockchain is famous for its role in facilitating the use of cryptocurrencies like Bitcoin over the past decade or so, there are plenty of wider uses for the powerful technology. While the growth of Bitcoin caught widespread attention, the cryptocurrency’s blockchain technology behind BTC was what captivated those interested in digital finance.
With the true potential of the technology still being discovered, we’re likely to see financial advisors and those embedded in the world of fintech encountering blockchain technology more frequently in the coming months and years.
Paving the way for Borderless Payments
One of blockchain’s most game-changing assets when it comes to the world of finance is its ability to support borderless transactions through dedicated decentralized currencies within its framework. This can help to pave the way for virtually instant and simplified payments owing to lower transfer costs between accounts.
Because blockchain transactions can be executed without the need for centralized verification, there’s no need for authorization from middlemen, and banks don’t need to use their own resources to leverage the transfer of funds - meaning that international payments can be far more cost-effective than traditional means.
Blockchain has the power to deliver a better flow of currency on a global scale. Where banks would charge 10% or 15% of a total sum transferred as a remittance fee, blockchain can reduce this expense to as little as 3%.
The further development of the technology means that we may soon see cryptocurrency borderless technology blend with traditional fintechs like Connectum, an AI-driven antifraud borderless payment provider that has the power to leverage one-click payments and multi-card processing worldwide.
Fintech has grown to become a dominant force in the modernization of financial institutions. Due to this, the past decade has seen the accelerated adoption of cashless technology and greater investment opportunities for the storage of wealth than ever before. However, the arrival and acceptance of blockchain represent the next step in the evolution of modern economics, and an invaluable step towards the democratization of finance for individuals and enterprises alike.
This article does not necessarily reflect the opinions of the editors or the management of EconoTimes