Please Note: This article is an introduction to the basics of blockchain in the fintech industry. If you are looking to dive deep, have a look at our case studies, or contact us for a free consultation.

Blockchain has emerged as the best long term investment in the financial services industry. The technology is garnering attention for all the right reasons. It is clearly a game-changing, disruptive innovation that holds the capability of shaking up the traditional financial markets. But its specific meaning is getting diluted along the way. Businesses need to understand the core value of blockchain technology for fintech and shape their strategies accordingly. This article discusses how blockchain could fit the current financial services ecosystem.

The fintech ecosystem

Before understanding blockchain’s impact in financial services, we need to discuss the ecosystem it could transform, and establish a general understanding of the same. Here are the roles of the various participants in the fintech ecosystem and the various challenges faced by them.

Governments, financial services companies, and fintech startups together form an ecosystem. All the participants of this ecosystem face different challenges and opportunities. With the advancement in technology every day, this landscape is becoming more dynamic and complex than ever.

Financial Institutions
Traditional financial institutions are trying to add layers of modern technology to their existing legacy systems. Holland FinTech (2015) forecasts that approximately $660 billion in revenue may migrate from traditional financial services to fintech services in the areas of payments, crowdfunding, wealth management, and lending. Banks are also investing heavily in innovation. However, these institutions haven’t yet fully diffused these innovation strategies to all their processes. Because of cyber attacks, institutions are wary of the threats to their systems.

The global investment in fintech startups has increased from around $3 billion in 2013 to $8 billion last year. While the disruption opportunity for fintech startups is massive, they are still looking for a way to scale their business – while facing increased regulations and higher costs.

Governments have an important role in the evolution of fintech. They need to balance their activities carefully – encouraging innovation without inhibiting evolution. As governments develop policies and programs, there needs to be an active engagement with stakeholders. This could be in the form of formal feedback mechanisms or ad hoc opportunities and conversations.

Blockchain driving disruption in the fintech landscape

It’s a very interesting space to watch. It’s clear that blockchain has the potential to make finance more efficient, but the big players are well-established. And establishments don’t tend to favor innovation. I’d keep an eye on startups who want to disrupt, but also know how to play nice with the institutions.

Jeff Koyen

Now that we have established a general fintech ecosystem, we can talk about its relation to blockchain. It is evident that blockchain is the cornerstone of the next revolution in the fintech industry. As the financial service industry is moving from exploration phase to application phase of blockchain, it is very important for the financial institutions or experts to understand the role of blockchain in fintech if they want to take advantage of this.

Why fintech needs blockchain?

The biggest challenge a fintech company faces is trust. Banks and financial institutions have huge cash reserves using which they create secure networks on which banking transactions take place. Fintech companies lack funds which restrict them from developing or procuring a high-security system.

Enter blockchain. Blockchain, for the most part, is cheap in terms of developing – and also highly secure and trustless. It allows companies to track the complete lifecycle of a financial transaction. Blockchain has given the opportunity to create secure and safe financial products and bring innovation in the financial sector.

Blockchain has the potential to truly disrupt multiple industries and make the processes more democratic, secure, transparent, and efficient. This leads us to another obvious question.

What Makes Blockchain So Powerful?

The answer to this question lies in the two inherent properties of a blockchain – decentralization, and distribution.

For centuries we have trusted a third party for carrying out all our transactions. The entire data has been centrally stored and these central parties majorly formed the way economies work. Have you ever wondered what would happen if one or all of these third parties went corrupt? It would create huge chaos in society. With blockchain, the data is decentralized and there is no single authority. Blockchain potentially cuts out the middleman, giving back the power to the owner of the assets – data or tokens carrying some financial value.

Suggested Reading: Understanding blockchain and its scalability issues

The distributed infrastructure provides blockchain with an ability to share information that is secure and provide for the unalterable transfer of data. This ensures data integrity. It makes blockchain technology an important tool in building trust among business and consumers. A distributed ledger can take over many of the functions performed by central third parties. This is particularly relevant for the financial services industry which trusts these third parties to build trust.

If you are running a business or are a part of leadership, then you must seriously start re-imagining your business model and explore how you can integrate blockchain to remain viable. To learn more, drop your email address here.

Now that you know about blockchain and fintech – and the way blockchain is driving disruption in the fintech industry, let us take a look at the current use cases of blockchain technology in the financial services. It is clear that there are a number of major areas for applying the blockchain technologies emerging but, right now, it seems to me these are the major ones:

General Blockchain Use-Cases

  1. Agreement automation via smart contracts: A smart contract is a computer code running on top of a blockchain containing a set of rules under which the parties to that smart contract agree to interact with each other. When these predefined rules are met, the agreement is automatically enforced. The smart contract code has the ability to facilitate, verify, and enforce the negotiation or performance of an agreement or transaction.
  2. Digital payments: The transfer of value or assets has always been a slow and expensive process. Imagine you have to send $100 from the USA to your friend in your Europe, who have an account with a local bank, it takes a number of banks and institutions to finally collect the money. With Blockchain, this process is simplified and faster at a cost much less than the traditional banking institutions.
  3. Digital identity: When identity management is moved to blockchain technology, users are able to choose how they identify themselves and with whom their identity is shared. Users still need to register their identity on the blockchain of course. But, a new registration for every service provider is not needed, provided they are also connected to the blockchain.
  4. Trading: Buying and selling stocks and shares involves many middlemen, such as brokers and the stock exchange itself. A blockchain is a decentralized and secure ledger that gives every stakeholder a say in the validation of a transaction and eliminates some of the ‘middlemen’ while changing the role of others. Eliminating the middlemen from the share trading process speeds up the settlement process and allows for greater trade accuracy.

To learn about more financial services use cases of blockchain, please click here.


Given the use cases, it is evident that companies should start shaping their blockchain strategies to future-proof their organizations. It is equally important to research and keep up with new developments to make the best use of blockchain for fintech.

Now that you have an idea where blockchain could fit in the financial landscape, you could check out our in-depth article on blockchain in banking, have a look at how blockchain could disrupt auditing, and how it could help in supply chain finance. To discuss the possibilities of blockchain for your organization, please drop your email address here, or directly email the author of this article at


Chief marketing officer at Deqode who helps clients to run customer-centric transformations and build their blockchain practice. M anages the company operations related to negotiation, business planning and brand building.

1 Comment

  1. Amazing read! Fintech firms are leveraging this technology in various ways which has lead to the development of innumerable innovative systems that has accelerated digital transformation.
    You can check more articles on the related topic here:

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