Blockchain vs FinTech: Basics, Applications & Limitations

The introduction of blockchain in Fintech brings in multiple possibilities for financial innovations. In addition to this, both of these technologies can lay out the path to entirely democratize the finance sector. Though blockchain and Fintech seem to have almost similar functionalities in some aspects, they contribute to the economy in different ways. However, to better understand the potentials of these evolving technologies, we need to understand their basics, applications, and limitations.

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Table of contents

• Understanding Blockchain basics
• Blockchain application
• Blockchain limitations
• Understanding Fintech basics
• Fintech application
• Fintech limitations
• Closing Thoughts

Understanding Blockchain basics

The basic concept behind blockchain is to offer the general public a way to perform safe online transactions without needing the approval of any central authority. In addition to this, it also eliminates extra expense by removing the need for intermediaries.

Blockchain is a type of distributed ledger technology that records data and transactions openly. Also, the system has an unchangeable nature. Hence once the data is sent to the network, altering it becomes impossible. Additionally, blockchain forensics helps to maintain the flow and security of crypto money over the blockchain.

Blockchain Applications

• Blockchain helps in processing faster money transfers. It can perform a quick transfer of fundings from one user to another. In fact, the majority of transactions take only seconds to complete.
• Another important application of blockchain is in managing supply chain processes. It helps in removing paper-based preliminaries. Additionally, ventures can spot defaults inside their supply chains quickly and verify goods in real-time. Blockchain further empowers ventures, and even buyers, to see how items perform according to a quality-control perspective.
• Blockchain runs a token-based framework that rewards users. Thus, putting away these tokens inside a blockchain would urge purchasers to get back to a specific chain or store for shopping. Also, it would end the misrepresentation of data. And will eliminate waste that usually comes with paper-based rewards programs.

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Blockchain limitations

• Blockchains tend to be less scalable in comparison to their centralized counterparts.
• The energy consumption of some blockchain solutions is a matter of concern.
• Though blockchain is safer than other platforms, it is still not entirely secure. Unfortunately, various aspects make blockchain networks vulnerable, such as Double-spending, DDoS attacks, Cryptographic cracking.
• Implementing a blockchain with an already existing system is not easy, plus the initial implementing charge of blockchain is relatively high.

Understanding fintech basics

A fintech is a form of the financial industry that uses technology to work on financial duties. Fintech can be processes, applications, items, or plans of action in the financial services industry, involving at least one integrated financial service.

Furthermore, through the internet, they give end-to-end assistance. However, Fintech also alludes to any inventive concept that further develops financial proceedings by offering technical solutions to diverse business circumstances. Likewise, the processes may prompt new plans of action or even new businesses.

Fintech Applications

Streamlining crowdfunding platforms

Crowdfunding platforms allow startup businesses and entrepreneurs to raise fundings from across the globe. Hence, it lets them reach investors regardless of their geographical locations and take advantage of international markets. Some popular crowdfunding platforms such as GoFundMe, Kickstarter, and Patreon are examples of fintech services.

Mobile payment apps

Mobile payment apps and outlets are probably the most common applications of Fintech. Such applications permit clients to fulfil their banking needs without actually visiting a bank. For instance, organizations like Interac and Venmo help clients receive and send money using their cellphones at insignificant exchange charges.

Bot-Advisors/Robo-Advisors

These are online investment executives services that utilize algorithms to distribute assets and ideally produce portfolios for clients. Additionally, they permit clients of every age group to participate in investment exercises at low expenses, also with negligible manual exertion.

Insuretech

Insuretech alludes to the technology used for the insurance model, which permits organizations to give customizable insurance services. Furthermore, it provides robust information security. Insuretech smoothes out the insurance procedure via the online filing of claims and management of policy.

Fintech Limitations

• Third parties can easily steal the data floating on online platforms. Such information is at the risk of identity theft or other lucrative purposes.
• Fintech applies only to large organizations.
• Due to its multi-layered management systems and prime locations of big offices, its operating cost is very high. Further, this means that Fintech is not flexible with organizations that have low operational costs.

Closing Thoughts

These two technologies are quickly moving towards mainstream use. At the moment, both appear to go hand in hand. Indeed together, they can give solutions that will help organizations with new opportunities and deeper insights. Also by combining forces of Fintech, Blockchain, AI, and the cloud can change the way organizations convey their services. Besides, it will uphold numerous ventures, for example, Healthcare, Financial sectors, Retail, Customer Loyalty, and many more.

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