The secure and trusted nature of blockchain mean it can help respond to problems in many areas of financial services, such as (but not limited to):
The cost of underwriting, contracts and managing insurance claims often involves a large number of complex processes that can be slow and expensive for both insurance providers and consumers.In concert with the use of smart contracts and the Internet of Things (IoT), blockchain technology has the potential to securely automate processes that can potentially reduce the likelihood of fraudulent claims, minimise operational overheads and decrease claim processing times.
In addition to disrupting the insurance value chain, blockchain technology also has the potential to drive a new wave of innovation in the insurance industry enabling the creation of new insurance-based products across new and existing insurance markets and new methods of underwriting and claims management.
Hundreds of billions of dollars are transacted internationally each year both by businesses conducting international trade and individuals sending money home to their families. This market of international transfers is referred to as the Remittance market. The cost of transferring funds internationally is expensive, as of Q2 2020 the global average cost of sending money internationally was 6.67% of the value sent, and depending on which country you are sending money from or to the price of remittance can vary dramatically.
Transferring money internationally is also an incredibly slow process by modern local standards with transfers taking up to 5 business days to settle. Blockchain technology has the potential to enable remittance market solutions that reduce both the cost and time of international transaction settlement. By leveraging secure, P2P payment corridors, blockchain-based solutions have the potential to sidestep the banking and regulatory inefficiencies that lead to slow settlement times, whilst simultaneously increasing market competition potentially leading to more competitive global remittance rates.
However, as a bleeding-edge technology, blockchain-based solutions still have a myriad of challenges to overcome if they are to make a significant impact on the global remittance market, such as on- and off-ramp reliability, volatility, scalability and liquidity.
Banking the Unbanked
Approximately 1.7 billion people are unbanked globally, representing over 20% of the world’s population. Access to basic financial services such as credit and lending can be instrumental for unbanked populations in reversing their poverty cycle, but many of these people don’t even have access to formal identification – an essential requirement for accessing traditional banking services.
Despite not having access to banking infrastructure, many of the unbanked do have access to mobile phones, one of the few barriers to entry for accessing blockchain-based currencies such as bitcoin. Blockchain-based currencies have the opportunity to step in where banks can’t or will not, bridging the gap between the banked and unbanked.
However, blockchain-based solutions still have significant obstacles to overcome in the pursuit of bridging this gap, including volatility of value and fees, scalability and user-interface difficulties.