blockchain is being hailed as “the new internet” and is driving transformation for businesses across multiple sectors, particularly for the Financial Services. But how exactly?
Let’s start with a quick recap of what exactly blockchain is and it’s benefits. Pinching a definition from the Financial Times…
“A blockchain is a shared digital ledger that allows transactions to be recorded and verified electronically over a network of computers without a central ledger. Cryptography is used to protect the data from fraud or hackers.”
So why is everyone, including us of course, so excited? Because the benefits are extensive:- decentralisation, reliability, simplification, transparency, traceability, cost saving, reduced room for error, faster transactions and improved data quality… just to mention a few!
So let’s take a look at some specific ways blockchain will transform the Financial Services industry – ultimately creating a much more satisfying customer experience for us all.
Traditional trade processes within asset management can be slow, manual, cumbersome and filled with risk when reconciling and matching – and they’re getting more complex with cross border transaction and for non-standard investment products, e.g. loans. Each party in the trade lifecycle (e.g. broker dealers, intermediaries, custodians, clearing and settlement teams) currently keeps their own copy of the same record of a transaction, creating significant inefficiencies and room for error.
Blockchain technology would simplify and streamline this entire process, providing an automated trade lifecycle where all parties in the transaction would have access to the exact same data about a trade. This would lead to substantial infrastructural cost savings, effective data management and transparency, faster processing cycles, minimal reconciliation and the potential removal of brokers and intermediaries altogether.
Fraudulent claims, manual processes, fragmented data sources, policies for one user sitting in silo and legacy underwriting models are some of the biggest challenges experienced in the insurance sector today – all causing low customer satisfaction.
Creating policies as smart contracts on the blockchain is an ideal use case for insurance. It offers complete control, transparency and traceability for each claim and could lead to automatic pay-outs.
