As things stand, FinTech solves problems and addresses pain points through innovative models, however, it is still reliant on legacy banking infrastructure. Cryptocurrency and its underlying technology, blockchain, has the power to revolutionise that infrastructure and, in doing so, revolutionise financial services work.
Even though Bitcoin has been making the big headlines, the main use cases in financial services are more practical – to store data in blockchain-based distributed databases for better efficiency and transparency. For example, we’ve seen our FinTech clients use blockchain, for storing financial operations logs and signature management. There are other uses too: for example, in lending blockchain can remove the need for centralised gatekeepers, making it more secure to borrow money and provide lower interest rates or in trade finance creating more transparency, security and trust among the trade parties.
There are many other use cases for the technology and we explored them in detail as part of Fintech Week London 2021 for our sponsored session panel discussion ‘What’s Next For Blockchain In Financial Services’ – you can get exclusive early access to the video by joining our FinTech Matters newsletter mailing list.
So, how does the landscape look right now? Firstly, there is a substantial difference in how blockchain can be used by players in different segments of financial services. Established banks and technology firms are primarily focusing on the applications for digital identities and regulatory compliance, whereas ‘start-up operators’ are mostly engaged in activities related to capital markets.
For banks blockchain’s power to reduce operational costs is the strongest business case while the current most relevant segment is that of payments. A decentralised ledger for payments can facilitate faster payments at lower fees, while clearance and settlement can get closer to real-time at reduced costs away from time-consuming and error-prone settlement processes.
Encouragingly for those working with blockchain, PoCs are being replaced with deployments to real production systems. While most use cases remain private and permissioned at this point, they are an encouraging indicator. The underlying technology of the network and protocol layers are now widely accepted as robust and stable allowing innovations to move to the application layer where the real value lies. As the higher stack application layer is more nascent, this is where using developers who are experienced becomes especially valuable to avoid wasting time and resources.
Technologies based on the BEAM VM and OTP such as Erlang and Elixir are often the right tool for the job when it comes to embarking upon a blockchain project. You can find the languages being used by a number of players in the space such as with ArcBlock’s blockchain developer platform that has a core infrastructure powered by BEAM technologies. They chose Erlang because it comes with built-in features that are critical to a blockchain system, like hot-upgrade, concurrency and high availability. This solid foundation has meant their team can focus more on building high-level features and making their platform developer friendly. Check out our recent webinar with Ty Chen, VP of Engineering, on building dApps on blockchain using Erlang.
Another example is POA Network, the Ethereum-based sidechain that offers an open-source framework for smart contracts to solve scalability, affordability, and interoperability issues. Erlang and Elixir give them the lightweight code needed to run thousands of processes concurrently on the same virtual machine, which is beneficial for scaling.
The last few years show blockchain technology stacks that can solve real problems in financial services. Ultimately, true advancements will emerge from the intersections of different disciplines. Interfaces of blockchain technologies with AI, ML and IoT need to be explored as we move to greater actual design and production engineering.
At Erlang Solutions we continue to collaborate closely with our partners in researching and delivering innovative solutions to support blockchain projects. This ranges from core blockchain technologies to more specific distributed applications supported by automated smart contracts. As experts with cutting edge know-how derived from direct exposure in building blockchain solutions and having been operating in this space for quite some time, we advocate that business leaders, regardless of industry, consider how to best use the technology to unlock value in their business models.
For a deep dive into fintech trends and how they should inform your tech strategy and decision making, download our whitepaper “Fintech Trends for 2022” here >>
If you want to start a conversation about engaging us for your fintech project or talk about partnering and collaboration opportunities, please send our Fintech Lead, Michael Jaiyeola, an email or connect with him via Linkedin.