July 18, 2023
By Anjali Kochhar
With the blockchain technology industry likely to achieve USD 12,895 billion valuation by 2032, here’s a look at possible use-cases in India’s ever-changing financial sector.
“Blockchain technology has the ability to completely transform financial transaction settlement by providing a decentralised and transparent ledger that allows for direct peer-to-peer transactions”, explained Shivam Thakral, CEO, BuyUcoin, when asked about the ability of blockchain to facilitate faster financial transactions.
“The decentralisation in blockchain reduces the need for a centralised authority, improving security and lowering the danger of fraud. The smart contract features of blockchain automate transaction settlement, eliminating human error”, Thakral continued.
Thus, in a nutshell, blockchain is believed to reduce the chances of financial fraud, data manipulation, and involvement of the so-called “middle-men”. But is financial security the only use-case of blockchain? Apparently not, according to industry experts.
According to Market.us research, the global blockchain technology industry was valued at USD 72 billion in 2022. With an estimated compound annual growth rate (CAGR) of 68 percent, the industry is expected to grow to a gigantic valuation of USD 12.9 trillion by 2032.
What does this imply? With the growth in the valuation of blockchain, its use-cases across industries are likely to expand too.
Here are some potential use cases of blockchain technology in the financial sector:
Use Case 1: Streamlining payment and remittance process
According to a report by Remittances Prices Worldwide (RPW), a branch of the World Bank, it costs an average of 6.25% of the total amount to transfer money between different countries. In the Indian context, the charges levied are 4.72% of the total amount to transfer money to the subcontinent. If one accumulates this fee based on total foreign remittances, it amounts to billions of dollars as fees, payments to intermediaries, and other charges.
In addition to charges, the transaction takes around 2-7 days to process. These issues were reiterated by Jaideep Yadav, founder, Kandle, a Crypto GameFi company, when he said, “When it comes to transaction efficiency and security, the financial sector confronts a number of major issues. The complex and drawn-out processes are frequently a part of older systems, which causes delays in transaction settlement and raises operational expenses”.
Here’s where blockchain enters the picture. “Blockchain accelerates transaction processes, minimising the need for middlemen and reconciling, by utilising distributed ledgers and decentralised networks. Smart contracts automate and enforce transaction terms, further increasing efficiency. Moreover, the lack of intermediaries due to its decentralised structure allows for direct peer-to-peer transactions, which lowers costs and boosts efficiency,” explained Yadav.
Thus, speeding-up the transaction process, even for foreign remittances, while reducing the operational charges and middlemen-involvement is a crucial blockchain use-case.
Use case 2: Inclusivity and accessibility
Latest World Bank data suggests that as many as 170 million Indians are still unbanked, despite digitization taking over the financial sector, accounting for more than 13% of the country’s population. Question is – how can the country reduce this figure?
While neobanks and fintechs are attempting to bridge the gap, blockchain technology can also be put to good use.
“Blockchain can simplify procedures like international payments, trade financing, and identity verification because of its immutable ledger and smart contract capabilities. Moreover, by giving the unbanked people access to digital financial services, it facilitates financial inclusion”, summarised the BuyUcoin CEO.
Thus, not only financial inclusivity but blockchain can simplify various financial services, making it easier for unbanked people to access these facilities without getting overwhelmed.
While streamlining transactions and financial inclusivity are two key use-cases of blockchain, there exists a lesser-known utility of this up-and-coming technology: real-time auditing. And this use-case is directly related to blockchain’s supposed transparency.
Dhruvil Shah, SVP- Technology, Liminal, a digital wallet infrastructure and custody solutions platform, explained, “Because of its transparency, it allows for real-time audits and an irrevocable record of all transactions, which promotes trust and lowers the likelihood of a disagreement. Blockchain technology may significantly improve the standard operating procedures of the financial sector by addressing these issues, leading to faster, more secure, and more transparent transactions.”
In a nutshell, here’s what industry-thinkers expect from blockchain, within the realm of the financial sector: streamlining transactions, converting the unbanked and banked, and of course, real-time tracking and auditing of immutable transactions.
Although in theory, these use-cases sound beneficial. But what’s left to see is whether these use-cases would come to fruition in full!
About the author
Anjali Kochhar covers cryptocurrency stories in India as well as globally. Having been in the field of media and journalism for over three years now, she has developed a sharp news sense and works hard to present information that goes beyond the obvious. She is an avid reader and loves writing on a wide range of subjects.