The future of financial infrastructure
Since blockchain technology emerged into the financial services industry, there has been no end to the transformations that it has made to our financial infrastructure. So much so, that we can confidently say that distributed ledger technology, like blockchain, will completely revolutionise the financial infrastructure forever. For many organisations within the financial services sector adapting to these changes in the infrastructure can be challenging but there is no shortage of innovative start-ups which can often provide automated solutions to existing manual tasks. Businesses such as NEX
have found their success in cultivating such products, with a number of technology services across all stages of the trade life cycle.
8 Dec 2017 18:38
Changes to digital identity
Distributed ledger technology (DLT) has several benefits associated with digital identity, which is important considering that digital identity is a critical enabler to broaden applications within the financial services industry. For transactions within financial markets to be accurate and reliable, digital identity information needs to be completely correct. These DLT systems are usually denominated with tokens; however users of the financial infrastructure will always demand a high level of liquidity between both assets on the digital system and fiat currency. Therefore, the technological revolution will alter the financial system and expand the overall economy through its innovative software. Plus, many more opportunities for integration may emerge through AI technology and the Internet of Things (IoT).
Processes will be simpler and more efficient
The whole purpose of the financial services industry is to ensure that all facilities and procedures are convenient and easy to follow in order to enhance customer experience. With DLT, the financial services infrastructure can become seamless in terms of the products and services offered to consumers. Because of the digital properties that DLT possesses, manual efforts will no longer be required to perform acts of reconciliation or resolve disputes. Using technology within the financial services sector seems like a dangerous idea considering the rise of cyber-attacks that we have seen lately. However, DLT is able to minimise the amount of fraudulent acts thanks to its ability to analyse transaction history and establish sources of abnormal transactional behaviour.
Current orthodox models will be questioned
We have relied on the same financial models for years on end, keeping us in the dark about how we can truly make our financial infrastructure more efficient and effective for consumers and organisations alike. Our current-state assumptions emphasise factors such as arbitrage concerns being created due to the lack of a version of the truth and audit trails, or that the lack of transparency increases regulations on our financial infrastructures.
Luckily, with DLT, these current assumptions can be set straight due to the implications that are associated with DLT. Firstly, DLT can eliminate the imbalance of information among market participants, keeping all participants in the know about developments in the infrastructure. Secondly, cooperation between regulators and regulated entities will be increased, keeping all transactions and processes within our financial infrastructure pristine and smooth for all parties involved. Plus, with a heavy amount of autonomy included in a distributed infrastructure, all agreements can be executed upon business outcomes, allowing all organisations in the financial services sector to work together more efficiently.