There is no doubt that blockchain technology is revolutionizing the world as we know it. It has the potential to change many industries, including the finance industry. If you are not sure whether or not you should be using blockchain technology in your fintech company, read on for three reasons why you should!
Fintech companies are all about providing fast and efficient transactions. Blockchain can help you do just that. With blockchain, transactions are processed quickly and securely. This is because blockchain technology uses a decentralized network of computers to verify and record transactions. Even SEPA transfers are slow compared to blockchain. According to EU guidelines, transactions proceed within 1-2 business days in the same country. Doing cross-border payments can require up to 4 days. Such payment processing is not scalable by modern standards and the missing piece is blockchain network integration.
It could be as simple as allowing cryptocurrency wallet integration. The user would be able to choose the blockchain network and before sending fiat, the integrated smart contract would swap fiat to the cryptocurrency of the user's preference. For instance blockchain network Stellar was designed specifically for that and has an average transaction speed of 5 seconds! Exactly, sending money from the USA to UAE would be instantaneous even during weekends.
Another blockchain network that performs well is Elrond, processing up to 15.000 transactions per second daily. The integrated smart contract completes the transaction within 20 seconds. Also, it is easy to integrate this blockchain technology, since it has one of the best crypto wallets Maiar with an unmatched user experience. Combased as well utilize this blockchain system to power our Shopify application.
Not only are blockchain transactions fast, but they are also very cheap. This is because there is no need for a third party to verify or process the transaction. This means that you can save a lot of money on transaction fees. Current financial technology uses SEPA or SWIFT as the most common money transfers methods. SEPA indeed offers transactions without additional fees, but it is only viable for the EU region. To send money cross-border you'll need to utilize Wire transfers or SWIFT. Both have high transaction fees, even varying from 15$ - 45$. It might be acceptable for large, less frequent transactions, but not for personal finance apps at all. It would also make recurrent payments expensive.
A transaction fee is negligible in blockchain networks like Elrond and Stellar. Even during cryptocurrency price fluctuations, the transactions won't cost more than 0.05$ (In fact transaction fee for Elrond is only ~$0.003 when the price per 1 EGLD is ~50$). This opens a set of new possibilities to automate processes (e.g. creating automated salary payments from the EU to the USA), which traditional banks can't implement due to operational costs.
Another great thing about blockchain networks is that they are very reliable. Unlike traditional fintech services, which are sometimes down for maintenance or updates, blockchain runs 24/365. This means that you can be sure that your transactions will go through without any delays. This is especially relevant to mobile banking and fintech startups as they can offer reliable financial transactions and use them to their advantage. On average, a single minute of network downtime costs 7900$.
Moreover, financial transactions are a sensitive manner and customers are keen on leaving negative reviews and challenging the quality of your financial services, resulting in potential reputation loss. Sometimes even the factors outside of your control cause failures in fintech companies. Take the example of the Visa outrage in 2018, resulting in financial services issues. Meanwhile Stellar and Elrond were never down, because of distributed ledger technology. Thus, your customers would certainly welcome an optional switch to blockchain-powered transactions during your server outrage.
With blockchain, you can enjoy fast, cheap, and reliable transactions. The global shift has already started and financial institutions starting to look for blockchain implementation. Contact us and together we'll contribute to the decentralization of the financial industry.