Finance and Accounting

Decentralized Finance (DeFi)- Revolutionizing the Future of Digital Financial Solutions

Digital transformation in financial services is not just a buzzword but is being widely implemented by service providers across the globe. Data reveals that 90% of the respondents in a study agreed that digital technologies are disrupting the financial sector. 

This is because a well-defined digital finance strategy overcomes the limitations of traditional finance such as:

• Centralised control by banks and governments
• Lack of transparency
• Slow processes that are prone to errors
• Vulnerability to counterparty risks due to the involvement of intermediaries
• Limited accessibility to financial instruments and investment options
• Cost-intensive financial instruments

Enter DeFi!

DeFi or Decentralised Finance

DeFi not only overcomes the limitations of traditional finance, but it also offers a host of benefits to boost financial services.

What is DeFi?

Decentralised Finance is a digital finance service that leverages blockchain technology to eliminate intermediaries and centralised institutions. It facilitates seamless financial transactions between individuals. Financial services like investing, borrowing, lending or trading virtual assets can be performed without involving central authorities like banks and financial institutions.

Features of DeFi

• The DeFi platform automates and executes financial transactions without the involvement of banks and financial institutions. Automated execution of the process minimises time and errors in the process with a substantial reduction in cost. Besides, the intermediary costs are further eliminated to make DeFi a cost-effective solution.
• All the transaction-related data is stored in a distributed ledger in the DeFi platform. This data can be accessed and validated by the platform user as required. The distributed ledger system makes the financial service transparent and secure.
• DeFi platforms deploy smart contracts which are pre-coded algorithms to execute specific functions if the defined criteria are met by both parties involved in the transaction.
• The smart contract feature of DeFi platforms minimises the complexities of traditional finance and streamlines transactions by ensuring faster processing times and minimal errors.
• The DeFi digital strategy for financial services is inclusive because it can be accessed by anyone and can be provided at any time the user has an internet connection. Users can conveniently save, borrow, lend or swap virtual currency using their smartphone.

Besides financial transactions, financial services within an organisation are responsible for a myriad of functions like payroll processing, invoice processing, compliance, and any other service that can be automated with the help of digital technologies. However, any lacunae in the selection or deployment of technologies can lead to unpropitious outcomes. Hence, the digital transformation of financial services requires a deep understanding of emerging technologies and their deployment. Outsourcing finance and accounting services to an external agency can overcome the limitations of digital financial strategy in an organisation.

Benefits of outsourcing finance and accounting services

• By outsourcing finance and accounting services, businesses can tap into the experience and knowledge of experts in the domain.
• When an external agency manages your F&A, the organisation saves time and resources which they can channel towards the growth of their business.
• Outsourcing allows businesses to scale their F&A functions up/down based on fluctuations in the business while ensuring that the business can access an optimum level of support at all times without the need to invest in additional resources.
• Finance and accounting service providers have access to advanced accounting software and technologies. A business can benefit from the latest technologies without incurring the cost of purchasing and maintaining them.
• Outsourcing finance and accounting functions to experienced professionals enhances efficiency and accuracy in financial processes. This can help businesses streamline their operations, reduce errors and make more informed financial decisions.
• By outsourcing F&A services, businesses can avoid the cost of hiring and training full-time accounting staff, the cost of expensive accounting software and infrastructure costs associated with office space, equipment, etc.

In a highly competitive market, businesses need to have a robust digital strategy in financial services. They need to leverage the latest technologies and build financial systems that enhance the quality of services and provide a personalised experience to their customers. Outsourcing finance and accounting services to an external agency is a cost-effective technique to boost the efficacy and productivity of finance.

How can Infosys BPM help?

Infosys BPM offers customised Digital Finance Services that facilitate real-time finance. Armed with an enhanced understanding of the F&A domain practices and in-depth knowledge of the latest technologies, we help our clients craft digital financial strategies that offer scalable growth.