It’s no secret that we’re living in a very different world from that of ourancestors. Technology has completely changed how we do things. There’s nowhere that the change is quite as apparent as in the financial services industry, though. We’ve gone from a system of notes and coins as currency, right through to paperless and digital banking. We’re fast moving beyond the point where we even need an actual wallet – with banks developing tech that allows you to use your phone to pay instead of an actual card or cash.
It’s developments in fintech that have made all of this possible. What’s fintech? It’s where technology has been applied in the financial services industry. And while the term “fintech” is new, the concept is not. Way back in 1918, the first example of fintech was launched.
What was this exciting new invention? The wire transfer. It seems pretty tame now, but it was big news back then. Since then, there have been many other advances made. You can see what those were by checking out the infographic below by Carsurance straight after this post.
The Biggest News in the Fintech Industry This Century
It should be no surprise that blockchain tech is now considered the most disruptive fintech innovation of this century. It’s true that this is still a nascent technology, and so we don’t actually know how far things will go. But the fact is that the tech has definitely piqued the interest of the financial services industry. Major banks, who initially expressed skepticism about Bitcoin and its ramifications, seem to have done a complete 360-degree about-face. Many have already spent serious money on developing blockchain-based applications. They’ve acknowledged that there are distinct benefits in using the tech. Blockchain tech:
- Is more secure
- Helps to reduce infrastructural costs
- Reduces the amount of time required to process transactions
- Helps cut the cost of verifying transactions
- Reduces the cost of securing data.
Basically, the tech could help banks run leaner operations overall. According to research by the firm Accenture and McLagan, adopting blockchain tech can reduce infrastructural costs by 30% and so save the major banks billions of dollars a year.
Why is Blockchain Considered So Disruptive?
It’s quite simple – it’s a complete departure from everything we thought we knew about internet security. Previously, it was considered better to lock all your data away behind secure firewalls. The idea of distributing that data across a range of different users seemed ludicrous. If we think about it more carefully, though, it’s a plan that is so simple that it is brilliant. By having the data duplicated over several computers, it is safer to keep it because it would be harder to change or delete the records.
So if a hacker wanted to insert her own information, she would have to take over every computer on the network and make the changes simultaneously. Assuming that she was able to do that, we have another security measure in place. Information in the chain cannot be altered or deleted because of the nature of the tech. So let’s say that the hacker was able to somehow get access to all the computers on the network and decided to make changes. Because each block on the chain is linked both to the block before it and the one after it, there’s no changing just one piece of data in the chain. You’d have to somehow go in, delete the chain up to the point where you wanted to start over, and then rebuild every other block afterward.
The security of the system does not just hinge on those two factors, though. The third security feature is that no one can add data without the consensus of the majority of users. So if I somehow managed to go in and delete the chain, I wouldn’t be able to rebuild the links without a verification process being conducted. I’d have to fool at least 51% of the other nodes. This would be a tough sell.
Blockchain tech is a major disruptor in the financial services industry. Not only because it showed us that there were different ways to do things, but also because it showed us that peer-to-peer transactions are possible. Where it will go in the future is not completely certain, but blockchain tech is here to stay. We’re not sure exactly how much it will change the financial services industry, we just know that it’s going to.