Look beyond the crypto hype and learn how to incorporate blockchain in finance processes, from trading to loyalty programs

While the hype around cryptocurrency and bitcoin may have cooled, blockchain adoption shows no signs of slowing down. By 2030, PwC expects that 20% of the world’s economic infrastructure could be running on blockchain-based systems, which makes its role in finance particularly important. Let us look at 10 of the lowest-hanging fruits for blockchain and finance and how they could transform financial operations.

1. Streamlining trade finance processes

Imagine you’re a trader navigating the complex waters of global commerce. Every shipment involves a barrage of paperwork, from letters of credit to bills of lading. Enter blockchain. Picture it as an incorruptible digital ledger distributed across multiple nodes. Each transaction, from purchase orders to invoices, gets recorded as an unchangeable block. This eliminates the need for manual verification, saving time and reducing the risk of errors or fraud.

Smart contracts – self-executing agreements triggered by predefined conditions – automate processes like payment release upon delivery confirmation. With blockchain, trade finance becomes a seamless, transparent ecosystem that accelerates transactions and bolsters trust between parties.

2. Improving asset management

Managing assets can feel like herding cats — keeping track of ownership, verifying authenticity, and ensuring compliance. Blockchain revolutionizes this by creating a tamper-proof record of ownership.

It’s possible to store your assets (whether real estate, stocks, or art) as digital tokens on a blockchain. Each token contains immutable data, including ownership history and provenance. This transparency combats fraud and streamlines transactions, enabling real-time settlement and fractional ownership. Also, smart contracts automate processes like dividend distribution or asset transfer, reducing administrative overheads.

3. Making supply chain finances more transparent

In today’s interconnected world, supply chains resemble a tangled web of suppliers, manufacturers, and distributors. Tracking the flow of goods and finances can feel like groping in the dark.

Blockchain illuminates this complexity. It converts supply chains into a series of interconnected blocks, each containing crucial data—product origins, shipping routes, and payment details. This transparent ledger ensures accountability and traceability at every step, mitigating risks like counterfeiting or unethical practices.

4. Speeding up cross-border payments

Sometimes, sending money across borders can feel like a journey through a bureaucratic quagmire — long processing times, hefty fees, and uncertain exchange rates. Blockchain offers a shortcut through this maze. Essentially, it enables peer-to-peer transactions without intermediaries. Each transaction, recorded on a distributed ledger, is immutable and transparent, eliminating the need for reconciliation between multiple banks.

Cryptographic algorithms ensure security and privacy, protecting sensitive data from prying eyes. Smart contracts facilitate instant settlement, bypassing traditional clearinghouses and reducing transaction costs. This makes cross-border payments faster, cheaper, and more reliable, empowering individuals and businesses to participate in the global economy with ease.

5. Transforming financial agreements with smart contracts

These self-executing contracts are encoded with predefined conditions and deployed on a blockchain network. When these conditions are met, the contract automatically executes, facilitating transactions or enforcing agreements.

Let’s say you’re entering into a loan agreement. With a smart contract, the loan terms, such as repayment schedule and interest rates, are coded into the contract. Once both parties agree and the conditions are met, the contract executes itself, releasing funds to the borrower and ensuring repayment according to the agreed-upon terms.

The technical brilliance behind smart contracts lies in their code, which is immutable and tamper-proof once deployed on the blockchain. This ensures that the contract terms cannot be altered, providing high security and trust between parties. They offer unparalleled transparency, as every step of the agreement is recorded on the blockchain and visible to all parties involved.

6. Verifying customer identity in financial services

Blockchain offers a secure and efficient solution to the age-old challenge of verifying customer identity in financial services. Your identity information, such as your name, address, and other relevant data, is encrypted and stored on a blockchain network.

Each time you interact with a financial institution, you can provide access to your encrypted identity data. Using cryptographic keys, the institution can instantly verify your identity without cumbersome paperwork or manual verification processes.

Blockchain ensures the security and privacy of your identity data, making it virtually impossible for unauthorized parties to access or tamper with your information. Additionally, it enables self-sovereign identity – giving you full control over your identity data and allowing you to choose when and how to share it with financial institutions.

Financial institutions adopting this technology can streamline onboarding processes, reduce the risk of identity theft and fraud, and ensure compliance with regulatory requirements.

7. Assisting in regulatory compliance

Blockchain’s cryptographic algorithms ensure the security and integrity of transaction data, protecting it from unauthorized access or tampering. Every transaction conducted on the network is recorded in a transparent and immutable ledger. This ledger gives regulators real-time access to accurate and auditable transaction data, reducing the risk of fraud and manipulation.

Smart contracts, deployed on the blockchain, can automate compliance processes by automatically enforcing regulatory requirements. For example, they can ensure that transactions adhere to anti-money laundering (AML) and know your customer (KYC) regulations or automatically report suspicious activity to regulators.

Leveraging blockchain in finance can streamline regulatory compliance processes, reduce costs, and build trust with regulators and customers.

8. Enabling loyalty programs

Blockchain in finance can be an innovative solution for managing loyalty programs. Loyalty points or rewards are tokenized and recorded on a blockchain network. Each time you earn or redeem points, the transaction is recorded on the blockchain, ensuring transparency and accuracy in reward management.

What’s more, blockchain enables interoperability between different loyalty programs, allowing users to earn and redeem points seamlessly across multiple platforms. Its decentralized nature eliminates the risk of fraud or manipulation, ensuring the integrity of loyalty programs. Smart contracts can automate processes like reward distribution and expiration, providing users a seamless and efficient experience.

9. Processing insurance claims

The blockchain serves as a distributed ledger where information related to insurance policies, claims, and transactions is recorded in a tamper-proof and immutable manner. When you initiate a claim, the relevant details are recorded on the blockchain, including your identity data, the nature of the claim, and any supporting documentation.

Thanks to smart contracts, you can trigger the release of funds once met. For example, suppose an insurance policy covers property damage due to natural disasters. In that case, the smart contract can automatically release funds to the claimant once the damage is verified by a trusted source.

The decentralized nature of blockchain ensures that all parties involved in the claims process, including the claimant, insurer, and any third-party validators, have access to the same information in real-time. This transparency reduces the likelihood of disputes and accelerates the claims settlement process.

10. Powering credit risk models

Blockchain technology has the potential to transform credit risk modeling by providing a comprehensive and transparent view of borrowers’ financial history and behavior. It is a decentralized ledger where financial transactions – including loan repayments, credit card payments, and other financial activities – are recorded in real time. Each transaction is cryptographically secured and linked to the borrower’s unique identifier, such as a public key.

By analyzing the transaction history stored on the blockchain, lenders can gain insights into borrowers’ creditworthiness and risk profiles. Traditional credit risk models rely on historical credit data from centralized credit bureaus, which may be limited or outdated. In contrast, blockchain offers a more complete and up-to-date picture of borrowers’ financial behavior.

For example, if a borrower fails to make a loan repayment on time, the smart contract can automatically trigger penalties or initiate debt collection procedures.

No Time Like Now – Blockchain Adoption Will Future Proof Your Business

Despite promising use cases for blockchain in finance, adoption has lagged behind. Most regulatory regimes tend to take a conservative approach to the technology, resulting in legal or taxation guardrails. Blockchain in finance also requires widespread adoption of decentralized infrastructure – a fundamental shift in computing systems. Yet, decentralized finance (DeFi) continues to flourish, signaling steady demand and opportunities for institutions that can capitalize on blockchain beyond cryptocurrency.