FinTech Takes the Lead in Blockchain Investment

In response to ever-encroaching security and privacy threats worldwide, one of the next up-and-coming technologies is blockchain, which allows for secure online transactions of all varieties without need for middlemen of any kind.

The projected impact of the cost- and time-saving methodology is being compared to that of the internet. And while it has yet to be embraced by FinTech as a whole, at least 40 of the world’s top financial institutions are experimenting with the ledger technology that quickly and transparently tracks the movement of assets, cutting the risk of fraud.  

What is blockchain? 

The new technology is causing a ripple in financial and other industries across the world, including insurance, health care, agriculture, music and sales of high-end goods like diamonds, art and antiquities. But analysts are still muddling its scope, especially because it remains largely unregulated.

What’s the big deal? The methodology provides a secure digital ledger of parties involved in most any transaction, such that no middleman is needed to facilitate. Through cryptography, each participant in a given network can securely manipulate its ledger, whereupon algorithms are applied to evaluate and verify such actions before they’re added to the chain. The system itself involves a network of computers, a network protocol and a consensus mechanism.

If you’ve ever used digital currency bitcoin, you’ve used blockchain.

Analysts speculate the growing use of blockchain will massively impact business by displacing middlemen industries such as financial trading clearinghouses and real estate title-search firms.

What does blockchain mean for FinTech? 

The industry looks toward huge savings in time and money along with a significant reduction in fraud.

FinTech has taken the lead in blockchain technology, says Magister Advisors, already investing almost $1 billion in related companies. The Wall Street Journal estimates the technology could cut $20 billion annually in global banking expenses.

In one example, players in financial industry trades can now bypass the fees and several days’ processing involved with central clearinghouses, completing their transactions in minutes or even seconds.

“The market for private blockchain 24 months ago was zero,” said Magister Advisors partner Jeremy Millar in December. “Now we’re at a stage in the market where it has already gone into specialization. This is a market poised to scale incredibly rapidly.”

Who’s leading the charge? 

Among FinTech investments noted in another Wall Street Journal story:

  • Contributing $30 million toward Chain Inc. last year was a group including Nasdaq Inc., Citi Ventures, Visa Inc. Capital One Financial, Fidelity Investments, First Data, Fiserv, Mitsubishi UFJ Financial Group and State Street. Chain’s now-available blockchain infrastructure can reportedly finalize high volumes of transactions in less than a second.
  • Investing more than $50 million in blockchain startup Digital Asset Holdings LLC is a group of 13 investors including J.P. Morgan Chase & Co., Citigroup Inc. and BNP Paribas SA.
  • The 42 banks in the New York-based R3 CEV Ltd. consortium will pilot a private blockchain this year.
  • Santander U.K. will pilot blockchain technology for international payments through an Apple iOS app developed by Ripple.
  • The U.K.’s Barclays bank has partnered with bitcoin bank Circle.
  • Crédit Mutuel Arkéa reports it’s the first bank in France to use private blockchain technology to deliver quicker and more cost-effective verification of customer identity.

Contact Thumbtack today to learn how your firm can maximize blockchain technology.

Leave a Reply