Blockchain innovations aimed for the financial market have become major disruptors in a finance environment whose operations have remained unchanged for decades. These products are change agents that hold a lot of promise for the market’s future.
The lending arm of banks is a chief source of revenue for these institutions and is also a significant accelerant to a country’s economic growth. Lending has seen increased growth even as other revenue sources such as over the counter banking charges decline due to technological innovations such as banking apps.
It is of utmost importance, therefore, for banks to make lending as seamless as possible in an effort to onboard more customers. Ripple a blockchain innovation is one of the industry’s most prolific blockchain finance product innovators.
The growth of blockchain based lending innovations
Using its interledger technology, Ripple, for instance, is working with a 61 Japanese banks consortium to develop “Money Tap” instant lending and payment app. The app enables instant money transactions via blockchain technology that eliminates the slow and expensive hindrances that come with intermediaries to financial transactions.
The app is poised to ensure round the clock money transfers around Japan that are safer, fast, efficient, and more affordable. Blockchain’s impact on the lending market has been realized through;
Enabling sustainable economic growth
In an effort to increase global economic growth, the creation of sustainable sources of revenue is vital. New jobs need to be created, and the existing ones require an upgrade to enable families to meet their basic needs.
At the heart of this development lies the availability of funds. Without accessible and affordable lending arms, there are small populations can do to increase investments due to a lack of capital. Blockchain innovations can assist the masses to access financial channels hitherto unavailable to them.
This will go along way in enhancing the financial inclusion for the marginalized. The lending market via blockchain can design better access to credit. Through blockchain, the credit will be safely handled because the verification process is easier and faster. All records on blockchain are immutable and public and will safeguard banking firms from disbursing money without a thorough knowledge of the lender.
Advanced lending products
As is the case with “Money Tap” many other loan products are being built around blockchain for the financial industry. Ripple’s xRapid platform, for instance, has been used by some of the world’s largest banks to speed up transactions.
The blockchain software provides a seamless yet transparent real-time record of all transactions to every stakeholder involved in the lending process. If a bank has xRapid therefore, it has no need to waste its client’s time with check confirmations or email queries when making lending decisions.
All they need to do is to view a historical link of transaction that is indelibly recorded on blockchain networks. The Euro Exim Bank, for example, uses Ripple and its xRapid innovation for its operations. The blockchain innovations have been so successful that Ripple’s blockchain currently has over 200 customers working with as partners.
Through blockchain, innovation, banks can issue products that attract more users. The old system of onboarding lenders was slow and inefficient. This led to an increase of online moneylenders who were preferred for the speed and interactivity of these businesses when compared to banks almost archaic systems. Blockchain technology is changing these aspects with services like Moneezy that simplify the lending processes.
Efficient clearing operations
The central bank of England has adopted blockchain technology to streamline its real-time gross settlement system. The project aims to open up the bank’s systems to potential innovations in retail and corporate banking.
The bank that through the use of ledger technology in the U.K can save at least $800 million annually for its payers through efficient clearing operations. By including the innovation in its Credit Clearing system, lenders will also access loans affordable and faster than ever before , an exam for such system is https://www.realisticloans.com, which is using this innovative technology to help their customer to find fastest funds.
The traditional bank’s clearing and settlement processes have always been complicated inexpensive. With blockchain, such wrangling problems will be a thing of the past.
Fraud prevention
Most organizations lose at least 5% of their revenue annually to fraud as per an Association of Certified Fraud Examiners report. The problem with fraud is that at times, it is complicated to detect or uncover, especially once it is entrenched in a banking system.
Blockchain technology can solve fraud through its distributed ledger data that is designed to be shared on peer to peer networks. These platforms have no centralized administration meaning that they cannot be compromised through a single point of failure. With such, therefore, initiating fraud is easily recognizable and can be thwarted easily.
This implies that no criminal activity can be concealed or faked accounting documents or files made. Every member on the blockchain network has access to the publicly shared data, which makes it easy to identify every stakeholder.
Lenders, therefore, will have an easier time identifying their customers without the need for extensive physical verifications. Blockchain technology builds trust and for lending relationships, which can significantly enhance working relationships.
Other benefits of blockchain for the financial industry
According to a report by Accenture, banks can save up to $10 billion by utilizing the blockchain to enhance the efficiency of their operations. How does blockchain assist in saving such massive amounts?
- Through instantaneous settlements
It is no secret that the financial system has extensive payment delay times, sometimes taking over 3 days to transfer funds across borders. The costs of this slow process are also very high and can at times be a charge of 7% to 15% per transaction. Blockchain transactions, on the other hand, can be verified 24/7 and they do not require the presence of a third party for validation. This makes them not only fast but also affordable. - Through enhanced financial products
Certain blockchain products such as the AZ FundChain helps to increase trust and improve transparency in a money circle. Users get social badges that assist in managing their reputation. Such a product will help financial institutions to create a conflict-free operating environment. It will also enhance financial inclusion for marginalized societies. - Through smart contracts
Smart contracts shorten the duration needed to finalize financial processes. They automate process flows, which makes the more complicated ones easier to accomplish. Smart contracts are also incorruptible, which also enforce regulatory compliances from the bank’s side.
The final word
The world is just but awakening to the immense potential lying in blockchain technology. It is an area that is growing at a very high rate, and it is possible that the upcoming trends will completely revolutionize the lending industry.