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Blockchain Finance Financial Services

7 real use cases of blockchain technology in fintech

Blockchain use cases in fintech have taken the world by storm. The popularity of blockchain keeps on growing. By 2018-2022 many European and North American banks were exploring the technology and how to leverage it. Financial companies spent around $552 million on blockchain projects globally. But, what is this technology exactly, and which blockchain usability will change the face of banking and finance?

This article will provide you with simple answers to both these questions and share different examples of blockchain ecosystems influencing global finance.

Table of contents:

  1. What is blockchain technology, and how does it revolutionize the financial services sector?
  2. Decrease transaction costs
  3. Resolve identity theft issues
  4. Global payment options
  5. Enhanced regulation and auditing
  6. Credit reports
  7. Lending as a way to gain budget or to invest
  8. Financial instruments trading
  9. Conclusion to blockchain application in fintech

What is blockchain technology, and how does it revolutionize the financial services sector?

Blockchain technology is a data management system using complex cryptography to power many cryptocurrencies and other decentralized applications. At their core, blockchains are accounting systems and digital ledgers that facilitate auditing. What makes them different from traditional databases is that they distribute up-to-date versions of ledger data to all the devices on the network. This makes it nearly impossible to change the information once it’s on the blockchain network as all the devices in the network would have to accept the changes i.e. in the voting process. 

One of the first times blockchain was used, its product was Bitcoin, which facilitates digital money transfers and has no central authority, such as a central bank. The protocol uses the computing power of all the devices — called mining — in the network to add new data to the chain and rewards miners with bitcoins. 

The complexity of the system makes it resistant to hacking as someone would have to take control of the 51% or more of the computing power of the network to do it. 

Later, Ethereum emerged and introduced smart contracts, making this blockchain more useful for business needs like financial markets.

Blockchain has many applications in real-life financial services. PWC revealed in a 2017 report that 77% of fintech companies expect to involve it as a part of their systems. Forbes summed up the 50 most significant 2022 projects and mentioned many in the fintech sector.

Fintech companies are moving towards this new trend for several reasons, including the following.

Decrease transaction costs

An online transaction has multiple elements that you have to consider. There are trading companies or applications, transfer channels, as well as some intermediaries who slow down the process and introduce some extra charges to it. The costs rise even more for international dealing.

A study by McKinsey says that remittance companies are making $40 billion per year with these fees. Blockchains can decrease all these losses. Blockchains enable direct peer-to-peer (p2p) transactions over the internet, which eliminates the intermediaries and their costs. The decentralized system also eliminates delays in online payments. Their real-time data updating feature further ensures smooth, error-free operations and prevents extra charges or lost investments. 

Resolve identity theft issues

A press release by Javelin shows that 6.64% of consumers became a victim of identity theft in 2017. Since then, digital fraud and identity theft issues were made even more painful, especially during the pandemic. 

Banks and fintech firms are required to implement know-your-client and anti-money laundering procedures following increased oversight. Of course, this means they need a lot of paperwork which slows their processes. It can take weeks to verify the identity and complete an online transaction. The lengthy and non-standardized paperwork of these verifications further adds to the problem.

Therefore, financial institutions are increasingly open to implementing a blockchain-based system. In this system, the user has to prove the identity only once. After that, they are given a verification document that they can use to conduct transactions from any part of the world. They can also use this document to manage and share personal data, log in without a password, and e-sign any document.

Global payment options

The blockchain network is entirely internet-based and doesn’t need any specific setup for operation. Thanks to the digitization of assets, users can access the data and conduct transactions from any part of the world using their account’s public and private keys.

Its internet-centric system also makes it flexible for global transactions. In fact, the 2016 Statista study about blockchain usage opportunities amongst financial institutes reveals that about 60% of the total blockchain-based transfer of digital assets involved cross-border transactions. 

Enhanced regulation and auditing 

With increased financial connectivity across the world, the demands for regulatory services are also growing. Companies will need better and more advanced fintech systems to deal with the demand, and that’s where blockchain solutions come to play. 

Blockchain applications use a decentralized system that creates new storage areas for every new action but never tampers with the old blocks. It also maintains a non-deletable report of the transaction related to your blockchain. The system also saves the original document of the trade that the users can view at any time.  

Moreover, blockchain provides all the data and analysis reports at one single source, which is beneficial for auditing. Its smart, read-only nodes decrease the time and the cost required for verification and accounting.

Credit reports

Banking & financial institutions often store the transactional information of their users to analyze their monthly transactions. They use this data to analyze the credibility of the users and prepare their credit reports. However, they mostly use a centralized server or system for this job, which is a huge security risk. Anyone who can hack into the server can get complete access to the private data of all users. 

Blockchain-based systems are different and more reliable in this case. They decentralize the information and use separate storage spaces to protect the data. It also deploys robust security algorithms and identity verification protocols that further enhance the level of security.

The best part is that they can also help to audit these credit reports at a much higher speed than the traditional system.  

Lending as a way to gain budget or to invest

Traditional credits and loans are not accessible for some businesses, while they may still require cash flow to expand or start performing efficiently. It is valid for some fintech startups or e-commerce companies. On the other side, groups of small investors are looking for a way to invest without much work and unnecessary risk.

Blockchain tools, especially smart contracts, are a way to match investors with individual borrowers. The technology provides a way to transfer assets, sign deals with terms transparent to both sides and finally automate debt management and execution. Blockchain mitigates risks on both sides and gives a chance to investors and borrowers that are omitted in the traditional finance system.

Financial instruments trading

Cryptocurrencies and NFTs are investment options, but that is not what this case is about. Blockchain networks, often private enterprise ones, have been changing the way financial assets are traded for years. The process requires approvals, audit trails, and accessibility for many pre-verified roles like financial brokers or advisors.

All of that is done by each unit taking part in the process separately. Blockchain is one virtual place where those businesses meet with full accountability and transparency of actions. Solutions for financial clearing services are cutting times and errors by more than half.

Conclusion to blockchain application in fintech

Blockchain use cases in fintech are revolutionizing the finance industry. The benefits of blockchain are clear as it has removed the barrier of speed, cost, and many more factors of financial transfers. It can provide you with real-time database management, financial tracking, resource management, and a lot more.

This future tech can even enhance the security level of your financial institution and work as a defence against identity theft issues. These advantages are noticed by large banks like HSBC, Deutsche Bank, and KBC are using this technology to maintain the reliability of their services.  

Blockchain platforms are the future of finance, not only for cryptocurrency users but also for FIAT currencies, a trend that is driving massive business. That is why many organizations are looking for a way to use blockchain to be a part of it. 

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Finance Financial Services Technology

How to build a secure and customer-friendly online payment solution

How to build a secure and customer-friendly online payment solution

Today’s era is the best time for all online service providers. The rapid growth of the e-commerce sector has given birth to innovative online payment solutions as well such as e-wallets, bank transfers, mobile apps and many more. A study by Statista says the online payment sector’s transactional value amounts to approximately $8.49 trillion and is still rising.

However, this rising dependence on online payment systems has also led to some problems concerning the security of these solutions. This article will introduce you to these problems and we will share some effective tips to deal with them.

How to build a secure and customer-friendly online payment solution

Table of contents:

 

Payment integration

As an online service provider, your payment system has to be fast, secure, and efficient. The most preferred card payment system may be secure, but it cannot offer these features all the time. The card payment system lacks an interface between processing systems, which restricts its linkage. 

Even if you use an integrated system, there are tons of regulations that restrict its efficiency. Some of them may need a specified application while the other may be out of reach for your business.

Therefore, you would end up in delayed payments, lost transactions, and sometimes even extra expenses for the fund transfer.

You have to find online payment providers who can offer multiple third party integration for your app or website. You can also obtain an application programming interface, or API and then have your development team integrate them. These integrated systems will address the liquidity issues and minimize delays. They will also open the client account in multiple banks, which will further boost the fund transfer processes.

You can also consider adding support for new technologies like cryptocurrency payment with your payment system. How about building a seamless Stellar peer-to-peer payment app to deliver great financial freedom?

 

Multiple payment ecosystem

The whole point of an online business is to provide services without any regional borders. The feature is profitable for business, but it also means that you will have to deal with multiple currencies. You will need multiple bank accounts around the globe and will be facing many different payment rules and regulations. Apart from the payment, your web or app will also have to deal with multiple languages, security standards, and banking infrastructure.

As an online service provider, you have to consider all these issues while designing your payment system. You have to ensure that your business can deal with the currencies preferred by your consumers. The payment system should also align with international taxes, trade rates, and other charges.

The best solution for it is to use a third-party payment system rather than developing a new one. You can simply search for online payment service providers who already have the required infrastructure for international payments. The service provider will take native currency from the consumer and convert it into your currency.

The service provider experienced with international payments can also provide you with tools and knowledge to better understand your customers in different countries.

 

Time and time again companies have trusted us as a software development provider. Read more about some of our projects and find out why.

Risk of fraud

One of the drawbacks of online purchase and payment is the risk of data theft. According to Statista, the US alone faced 1244 data breaches in 2018, which exposed over 446 million records. The leaked data included information about the companies, personal information, as well as payment details of users.

Both the government and online stores are taking measures to secure consumers from these problems. They have started to use data encryption, secure sockets layer certification, and many other techniques to secure confidential data. Merchants are must also meet the payment card industry data security standards before accepting card payments. 

The main security arena of this standard includes:

  • Building and maintaining a secure network
  • Implementing a vulnerability management program
  • Regular testing and monitoring of the payment system
  • Use of strong access control measures
  • Developing and using an information security policy
  • Encrypting cardholder data and protecting it

Though there is no way to stop data fraud completely, there are tricks to prevent them. For them to work, you have to find an online payment service provider who follows the latest security standards. You should also analyze your network for vulnerabilities like weak passwords and exposed systems.  

Moreover, you can consult some security experts and conduct audits to find the weakness of your application or websites. 

 

User experience

The most considerable challenge in a payment method is changing user preferences. The consumer doesn’t want to spend time in complicated procedures or checkouts. They want simple, straightforward, yet secure payment methods.

In simple words, you need to develop a friendly user interface and provide all the required options. It should include support for cards, mobile payment, e-wallets, and all the other well-used payment modes. Moreover, you should never stick with just one or two debit or credit cards. Include at least the popular types such as American Express, Visa, and Mastercard. The same theory also applies to e-wallets.

Apart from payment, it is also best to integrate recurring payments, customization, payment tracking, and similar management tools.

Following are some more ways to ease out the payment process for your customer:

  • Allow purchase and payment without signup requirements.
  • Use a consistent design with minimal distractions to prevent your consumer from confusion
  • Skip unnecessary information like a surname
  • Reassure security using Secure Socket Layer and minimizing redirect pages.
  • Offer to save payment details and use it for one-click payment in the future.
  • Enable auto-fill wherever possible.
  • Assist users and use input masks to prevent errors.
  • Always display a brief description to explain errors.
  • Optimize your payment page for mobile tablets and all other smart devices.
 

Final thoughts on building secure and customer-friendly online payment solution

Online payment systems are the latest trend in today’s internet-driven world. 

With these payment systems, you can get rid of the regional barrier and acquire consumers from all over the world. They can also remove the hassle of visiting a particular address for availing services or getting payments. Furthermore, new technologies such as blockchain offer new ways of securing sensitive data and offering more transparency.

So, research, prepare and get ready for business growth that comes with these systems. In the meantime, check out how we helped IPG with building and integrating their core payment system.

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Blockchain Entrepreneurship Financial Services Other

How blockchain loyalty points can save frequent flyer programs

Blockchain loyalty points could help consumers protect their frequent flyer points. Redeeming these rewards is often easier said than done. Up to 36 percent of frequent flyers say that airline loyalty rewards expire before they’re able to use them. 64 percent of airline customers also claim that airline frequent flyer programs are too complex for them to navigate. Of course, if the airline suddenly collapses, you also lose the points you worked hard to collect. We need to hold airlines accountable for their promises. Rolling out blockchain loyalty points could be one way to do just that. The immutability of blockchain systems serves as a model for how to improve frequent flyer programs.

Origins of frequent flyer programs

Frequent flyer programs encourage customers to stay loyal to the airline companies and prevent them from choosing competing carriers. Since there is very little difference in the underlying product, airlines have to come up with attractive perks to keep consumers coming back. These programs emerged in the early 1980s as a way to do just that. Airlines then would use a customer database to track miles flown and this birthed a reward system of a mile earned for a mile traveled. 

The trend spread and has now become a common marketing tool for many airlines. In theory, the programs offer a range of free flights, accommodation, and exclusive services such as a faster check-in. Members earn points for each flight depending on the length of the flight — the longer the flight, the higher the fare and the higher the point score. 

To redeem their miles travelers book tickets with their frequent flyer number. However, some issues exist that can make the process harder for customers. For example, airlines are notorious for blackout dates. These are peak travel periods where airlines raise prices around holidays or popular sporting events at destinations. Limited seat availability can also make airlines inflate seat prices. In a way, this not only makes it hard for customers to retrieve their loyalty rewards but can also cause them to forgo their rewards altogether.

Loyal customers deserve better and as pressure from low-cost carriers drives costs down, new ways to lure frequent flyers are increasingly important. One way to do this is to transform airline loyalty points into immutable digital assets with blockchain.

Blockchain loyalty points

If we look at blockchain as a way to protect digital assets, treating airline flyer miles as non-fungible tokens could help airlines keep better track of these points, and make it easier for consumers to spend them. We’ve already designed the blockchain architecture for a customer loyalty management company called Gabrotech. The Singaporean firm is revolutionizing loyalty points programs. With the issues facing traditional loyalty programs, blockchain is a perfect fix for these problems. Better transparency and security are some of the main advantages.

  • Ease of retrieval: with blockchain, customers can redeem their flyer miles more easily as opposed to the traditional method. The biggest issue customers have had with the existing method is the limited rewards. The added flexibility blockchain brings will enable them to redeem flyer miles easier, and in more ways including redeeming in installments. Additionally, blockchain tokens can be used across a wide variety of platforms. Instead of juggling different cards for different loyalty rewards, a system leveraging blockchain could allow consumers to switch between cryptocurrencies and even store tokens with ease. Customers will also be able to convert the cryptocurrency rewards into actual cash if they want. This doesn’t come with the old system.
  • Smart contracts:  a smart contract is a blockchain feature that helps two or more parties to digitally facilitate, verify and enforce their contract. In other words, they allow you to exchange anything of value in a transparent way while passing over the traditional need for a middleman. Blockchain removes the need to pay any middlemen and thereby saves the customer, and airline time and money. A smart contract is an automatic bind, it won’t let either of the parties to make changes to the contract without the permission of the other one. That’s why blockchain-based airline loyalty reward is transparent.
  • Security: blockchain is an algorithm that creates a rigid and time-stamped database of every transaction on it. This makes it easy for customers to follow every transaction. The rigid rules drastically reduce the chances of any kind of fraud.  

Airlines ahead of the blockchain curve

Singapore Airlines won the highly coveted first spot at the Startracks airline awards in 2018 for several reasons. From their impressive customer service, the beautiful airport to the magnificent cuisine served on its flights, they have proven themselves the absolute best at what they do. So, it was no surprise to see them top the list. In addition to all these, however, Singapore Airlines is the world’s first airline carrier to launch a blockchain-based airline loyalty digital wallet. The airline collaborated with KPMG Digital Village and Microsoft to come up with the blockchain-based solution they dubbed KrisPay. 

In a company press release, head of KPMG’s Digital Village in Singapore, Jan Reinmuller said, “with the blockchain-based digital wallet, it is a straightforward process for participating with merchants to connect with the program and for customers to make a purchase with their tokenized miles.” The process used in KrisPay is relatively simple to use. All airline customers have to do is download the KrisPay app and convert their KrisFlyer miles into KrisPay miles. Customers can then spend their loyalty rewards by scanning the KrisPay QR code at any merchants cooperating with Singapore Airlines. At launch, there were about 18 merchants available and the number has since increased. 

It works too, unlike in the traditional system where customers have to wait for their flyer miles to accumulate before being able to use them. With a simple scan, customers can use as little as 15 KrisPay miles to pay for purchases made with partner merchants. Even if a customer’s loyalty reward is not enough to book a flight, less than frequent travelers can convert and spend their points elsewhere. 

As shown above, blockchain has the potential to change the way companies structure loyalty programs. Singapore Airlines is by no means the only carrier adding the use of blockchain to its operations. Cathay Pacific and Air New Zealand have already followed suit in 2018. 

Conclusion

Blockchain loyalty points could make it easier for airlines to track, and attract consumers to their service. Additionally, reassuring frequent flyers that their digital assets will not go away will encourage them to actually use them. The high percentage of consumers that express frustration with their frequent flyer programs should spur airlines to act. Nearly 8 trillion flyer miles go unused, which should signal a breakdown in the service.

Soon, airlines still using the traditional frequent flyer programs to reward their customers lag behind tech-savvy carriers. They already are, but they may soon start losing customers to rival airlines that are using the better means blockchain offers to reward their customers. 

 

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Finance Financial Services Technology

Recurring payments vs. subscription

Recurring payments vs. subscription

Though both recurring payments and subscription systems share some similarities, they are still distinct from one another. Choosing the best one without knowing the concept behind them both is challenging.

With the rise of digitization and e-commerce, the demand for flexible payment options has also increased. Some businesses and customers want a subscription system, while others prefer recurring payment models.  Let’s check what is the best model for your business to receive online payments.

This post will guide you with this aspect. You will know the difference between recurring and subscription payment options. Read this and select the one that fits well for your business.

Reccuring payments vs. subscription

Table of contents:

  1. What is a recurring payment system? 
  2. Fixed payment and variable payment
  3. Benefits of recurring payment
  4. Implementation of recurring payment model
  5. What is subscription payment?
  6. Benefit of a subscription system
  7. Implementation of subscription payment model
  8. Final thoughts on recurring payments vs subscription
 

1. What is a recurring payment system? 

Recurring payments involve an auto-pay system that works with a one-time payment setting. Consumers have to provide you with the details of their payment method, usually debit or credit card. Then the whole thing is on your system. It has to save the details and automatically transfer funds from the consumer accounts to yours after a set interval.

The main benefit of this payment model is that you don’t need the customer’s permission every time, so there are no delays. Of course, the user will have the right to cancel, but before the start of a new payment cycle.

 

2. Fixed payment and variable payment

The payment mode further has two subcategories — fixed payment and variable payment.

Fixed recurring payment:  The fixed recurring system is similar to the method followed for magazine charges, gym subscriptions, and automatic bill paying systems.  You have a set amount for a particular service, and the customer will pay that for every cycle. It may be a monthly, yearly, weekly, or quarterly cycle.  

Variable recurring payment: The term itself suggests that this model will deal with payment cycles that include changes in the principal amount. This system works best for usage-based services such as internet charges, utility bills, and more.

 

3. Benefits of recurring payment

The benefit of this payment model is that it saves consumers and businesses a lot of time. However, this is not the only reason that makes it a preferred option.  The following reasons also contribute.

Benefits of recurring payment
 

4. Implementation of recurring payment model

The deployment of recurring payment in your business is not a very complicated task. You can employ the system by following the steps given below:

  • Select the platform that can help you to create a recurring payment option. 
  • Create guidelines for the customer.  You have to guide them through all the terms and the procedures of the payment.
  • Set the elements such as payment start date, billing frequency, end dates, amount, and more.
  • Take measure and develop a system to store sensitive payment information. There are Payment Card Industry Data Security Standards that you have to follow. 
 

5. What is subscription payment?

The subscription payment system is an advanced payment model developed to enhance customer retention rates. The model involves providing a small preview of your services and encourages consumers to buy your services.

The basic concept of the method is similar to the recurring payment. But in this case, the consumer achieves more flexibility.  They can choose from multiple programs and can switch between them.

Moreover, in most subscriptions, the periodic payment will be manual. It means the consumer will have a total control over the payment and will not have to share confidential details with the business they are dealing with.

 

6. Benefit of a subscription system

The subscription is a preferred payment model for software as a service products.  The following things make the subscription accessible.

Benefit of a subscription system
 

7. Implementation of subscription payment model

The deployment of the subscription payment model is a multi-layer process that works on both backend and frontend. You have to create a network that can receive, save, and sort the consumer details and payment status in real-time. Following are the things that you have to undergo for adding a subscription:

  • Ask the consumer for signup and receive their information.
  • Collect and safely store their payment details for future references.
  • Add the consumer to the subscriber list along with the dates, time, and other similar information.
  • Once the customer has connected, create the subscription status chart.
 

8. Final thoughts on recurring payments vs. subscription

The recurring and subscription are very similar to each other in almost every aspect. They are modern, widely accepted, and help to retain consumers. They even share common benefits like payment security, more extensive exposure, and more.

The only difference that you will find in them is the timing and payment options. The recurring payment entirely depends on credit or debit card, while subscription may be developed for other payments. Moreover, in the recurring model, you have to store payment details, but the subscription system if flexible with it.

So, the final answer to the question, “Which one is the best?” It depends on the type of services you offer, the flexibility you need, and the audience you are targeting. Analyze these aspects, combine them with the above data, and you will have your answer.

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