Distributed Ledger Technologies (DLT) allow the entire financial services industry to dramatically optimize business processes by sharing the data in an efficient, secure, and transparent manner.
Blockchain technologies are reshaping the landscape of financial services. Existing inefficient business models and profit pools are beginning to face risk of disruption by upstart highly efficient blockchain-based platforms. Substantial benefits are to be gained using blockchain technologies, especially in back-office operations and to improve transparency, which is highly favored from an audit and regulatory perspective. Those harnessing these advancements are set to have key competitive advantages in the financial services industry industry in the coming years.
The existing capital markets infrastructure is slow, expensive, and often requires several intermediaries. Many new blockchain capital market inventions are entering the market, such as ‘Smart Bonds.’ Smart bonds can automatically pay the bondholder their coupons once preprogrammed conditions are met. These new types of financial product (often called ‘Smart Securities’) are made possible by ‘Smart Contracts
’ which are digital contracts that are translated into computer programs and have the ability to be self-executing and self-maintaining, requiring no need for human maintenance.
Blockchain Financial Services Use Cases
Blockchain technology can be applied to financial services in the following areas:
- Smart Securities via Smart Contracts
- Post Trade Processing and Settlement
- Loan Origination and Servicing
- Foreign Exchange Markets
- Derivatives Markets
- Record-Keeping Processes
- Auditing and Corporate Compliance
- Corporate Shareholder Voting
- Reducing Counterparty Risk
- Cross-Border Payments
- Many More