The Effects of Blockchain on Financial Services


Back in 2016, the Blockchain marketplace was worth a little more than $2.3 billion. The value of this entity has more than doubled in the two years since, however, while it’s projected to be worth a staggering $339.5 billion by the end of 2021.

The value of this market is set to grow as the underlying technology diversifies, which will create a number of new and exciting applications for Blockchain. The financial services sector will remain the most prominent of these, with this industry set to benefit from Blockchain’s innate attributes and characteristics.

In this post, we’ll look at how Blockchain has already impacted on financial services, while asking what type of influence it will have in the future.

  1. The Introduction of Currency Options

Blockchain is best known as the technology that underpins cryptocurrency, including this market’s poster-boy Bitcoin and a host of emerging assets.

All emerging cryptocurrencies are evolved using Blockchain’s decentralised ledger technology, which allows for completely transparent financial transactions and eliminates costly commission fees.

As an innovative and cost-effective asset class, cryptocurrencies have become increasingly popular among investors and are now easily accessible through online trading platforms like Oanda.

While cryptocurrency remains a volatile marketplace, it’s also one that has shown tremendous growth potential during the last 18 months. Bitcoin saw its price increase from $900 to a whopping $20,000 in 2017, for example, while similar innovations such as Ripple and Ethereum are poised to experience exponential growth of their own during the next 12 months.

This trend is set to continue indefinitely, with new digital currencies entering the market and continuing to diversify the space.

  1. Smart Contracts and Transparent Payments

On a similar note, Blockchain is also being leveraged to create potential smart contracts, which allow for the instant and transparent transfer of funds and asset across a host of markets.

The potential of smart contracts is immense, as this concept can be applied to every type of financial agreement and eliminate the role of costly middlemen. As a result, transactions and agreements can be processed with total transparency, while the element of mistrust can be completely eliminated in industries such as investing, wealth management and real estate.

From escrow arrangements to investment transactions, smart contracts will alter the role of intermediaries while creating simple, person-to-person wire transfers that can be completed in real-time.

  1. Revolutionising Capital Markets

Given that Blockchain technology makes it possible to transfer value more efficiently, it is likely to have a significant impact on the typical flow of capital.

We’ve already seen evidence of this in the field of crowdfunding, where the emergence of initial coin offerings (ICOs) has created a unique and popular method of funding projects. One of these led to the launch of Ethereum, which is a decentralised platform that may ultimately revolutionise the online gambling market.

In fundamental terms, this will create a significant shift in terms of how businesses access capital and funding in the age of Blockchain. We should therefore expect capital markets to evolve considerably in the near-term, with Blockchain at the heart of this sustained transformation.

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