Finance and Accounting

How is blockchain technology revolutionising digital financial services?

The banking and finance industry has experienced a host of disruptive changes over the last decade, with digital financial services taking over traditional banks and changing the way we look at financial management. Blockchain technology, the inception of digital currency, has been one of the most powerful forces driving this change. From streamlined cross-border transactions and decentralised finance to asset tokenisation and smart contracts, this tamper-proof, decentralised ledger technology has improved efficiency, reduced cost, and enhanced security for financial transactions.

Let us explore the transformative impact of bringing blockchain and finance together and the way it has revolutionised the contemporary finance industry.

Impact of blockchain technology in banking and finance industry

Since the advent of digital financial services, how banks and other financial institutions work has changed dramatically, and blockchain technology has played a pivotal role in this change. Some of the ways blockchain solutions have changed the contemporary financial markets include:

• Unprecedented security measures to ensure data integrity, restrict unauthorised access, and enhance fraud prevention.
• Enhanced transparency, visibility, and auditability in financial records and reporting.
• Faster, cheaper, and more efficient direct transactions between cross-border parties.
• Enhanced democratised investment opportunities with asset tokenisation.
• Automated and efficient contract enforcement with self-executing smart contracts.

These are just some of the examples of how blockchain in finance has brought about a paradigm shift. Although there are challenges, like the talent gap and a lack of a standardised regulatory framework, blockchain is set to shape the future finance landscape with innovations like green finance, decentralised finance, and much more.

Blockchain use cases in digital financial services

Emergence and advancements of blockchain technology have touched every facet of the finance industry and changed how you access different financial services. Here are some of the use cases of blockchain in finance that are shaping the present and future of digital financial services:

Payment systems

With more businesses operating in the international market, one of the biggest impacts of blockchain has been streamlining global payment and remittance systems. Blockchain-based systems eliminate the need for intermediaries, making cross-border transactions faster, more secure, and affordable.

Trade finance

Extensive paperwork, slow and cumbersome processes, and the prevalence of fraud characterise traditional trade finance. Blockchain technology addresses these challenges by ensuring a tamper-proof digital ecosystem for secure and transparent digital transactions. It can also foster collaboration among trading partners, improving international trade relationships.

Capital markets

When it comes to navigating capital markets, businesses have to navigate stringent regulations, liquidity risks, interest rate volatility, cumbersome processes, and longer wait times for market entry. Blockchain solutions can help digitise and streamline process workflows, reduce costs, lower operational risks and fraud, and eliminate a single point of failure through decentralisation, making capital markets accessible.

Banking and lending

Blockchain technology in banking and lending has played a central role in transforming cumbersome, time-consuming, and paper-heavy core banking processes. By streamlining these processes, blockchain has facilitated the digitisation and centralisation of assets, enabled real-time verification and reducing operational risk with the help of advanced data analytics capabilities.

Asset management

Blockchain applications in finance, including asset tokenisation, smart contracts, and programmable agreements, can help automate various asset management processes, reducing operational costs and risks. They can also facilitate fractional ownership and improve access to investment opportunities, contributing to financial inclusion while driving transparency and efficiency in asset management.

Insurance

Blockchain in insurance can streamline and automate claims processing with smart contracts, reduce fraud, enhance risk assessment, and ensure transparency across insurance workflows. As blockchain applications mature, the insurance industry can offer more efficient and customer-centric processes that benefit policyholders and providers.

Regulatory compliance

Secure and tamper-proof ledgers in blockchain applications simplify regulatory compliance through transparent and auditable financial records and reports. Moreover, blockchain in finance can also streamline processes like KYC, customer onboarding, and anti-money laundering compliance. This alleviates regulatory burdens and fosters innovation and growth in the contemporary finance industry.

These use cases of blockchain in finance not only improve operational efficiency but also foster greater opportunities for financial inclusion and economic growth, especially in developing economies, through decentralised finance platforms.

How can Infosys BPM help streamline financial processes with blockchain?

Digital financial services have shaped the contemporary finance industry, bringing efficiency, security, and transparency to financial transactions with the help of blockchain technology. Infosys BPM Digital Finance Solutions can help you achieve this paradigm shift in your finance and accounting operations with the help of best-in-class technological solutions in our digital finance ecosystem. Our 5-lever strategy, encompassing point solutions, automation, artificial intelligence, blockchain, and digital operations, can help you get started on a transformation journey that facilitates "real-time finance". Become an intelligent enterprise and achieve scalable enterprise growth by leveraging blockchain in finance with Infosys BPM.