Blockchain And Fintech As A Flywheel For New Changes

Blockchain is no longer a buzzword and hype, but many people still don’t understand it. Blockchain is very often associated with cryptocurrencies. However, that’s not only about Bitcoin or Ethereum. In this article, you will learn how blockchain technology appeared, its benefits, and how it impacts the fintech industry. 

When Did Blockchain Technology Explode?

The idea of blockchain goes back to 1991 when scientists Stuart Haber and W. Scott implemented a computing solution for digital documents to prevent them from being falsified or signed with the backdate. The system developed by the scientists used a cryptographic chain of blocks to store documents with timestamps. In 1992, the solution was improved with some hash technology that allowed us to collect multiple documents into one block. 

In 2004, computer scientist Hal Finney introduced a system called Reusable Proof of Work (RPoW). The system received non-interchangeable hash tokens based on proof of work and then signed by a cryptographic algorithm. These tokens could then be sent from one person to another. This solution added value to the development of the blockchain technology as it addressed the double distribution challenges and retained the ownership of the tokens. So, anybody could check the correctness of a particular token in real-time. 

The end of 2008 is the date that we remember better than the years above. At that time, a person named Satoshi Nakamoto sent a white paper that introduced a peer-to-peer system of cryptocurrencies called Bitcoin.  

How Does Blockchain Work? 

Since its emergence, blockchain has been considered one of the easiest ways to complete transactions. Blockchain is the technology that allows people to avoid using bank services, online wallets, and third-party applications. Blockchain is a chain of blocks containing some information. It is a distributed ledger that is entirely open to any person. The most unusual thing about this technology is their property - once some data has been recorded, it can’t be changed. 

Each block has the following: data, hash, the hash of the previous block. The information that is inside of the block depends on the type of block. For example, the bitcoin block keeps the transaction information, i.e., the sender, the receiver, and the sum of money transferred. Bitcoin is the first implementation of cryptocurrency. Let’s find out what are other examples of blockchain implementation. 

Need an expert in software testing for blockchain in fintech? We can help you.

How Blockchain Supports FinTech

According to Deloitte, the blockchain’s potential in the fintech industry is growing. Firstly, it helps avoid using third-party services to transfer various assets. The latter is not limited to money. With the help of blockchain, secure payments for vehicles and even home properties have become possible. Secondly, unlike within banks, the time needed to transfer assets in the blockchain system is just a few minutes or even seconds. Ultimately, the system is secure and quite transparent as all the information is available for the public. Thus, anybody can check whether the record about the transaction hasn’t been changed. 

Fintech, an industry that is actively harnessing innovative technologies to improve the level of financial services, will obviously take advantage of blockchain. So, let’s take a closer look at how fintech can benefit from using blockchain.

Blockchain Solutions For FinTech

Blockchain fintech solutions that are rapidly being built nowadays include the following things:

  • Identification to store secure information
  • Payments for assets transfers
  • Exchange platforms to buy and sell cryptocurrencies
  • Smart contracts
  • Unique platforms to trade

​All these solutions are beneficial from the security, availability, scalability standpoints. Overall, the pros of using blockchain in fintech are as follows:

  1. Fast transactions without authorization from third parties like banks
  2. Digitalization of assets and improved efficiency of operations
  3. Mitigation of corrupted or fake transactions
  4. Real-time monitoring of payments
  5. Lower fraud and money-laundering risks
  6. Lower back-office expenditures
  7. Opportunities to develop new products faster and enter new markets
  8. No or low fees for payments

Surely, these benefits of blockchain open a lot of opportunities for fintech on the market of financial services. Incumbent banks have already felt how they lag behind blockchain fintech startups. As a result, what we see today is the strong need for banks in collaborating with these young and disruptive companies. 

According to Statista, as of 2018, C-level executives from different banks around the world said that fintech had a great impact on the products their clients choose. About 67% stated that fintech technologies influenced wallets and mobile payments significantly. Traditional payments were also impacted by non-traditional financial services. 

A lot of companies start adopting fintech solutions. According to Ernst & Young’s research, 96% of consumers are aware of at least one fintech payment or money transfer service. 75% say that 3 of 4 global consumers already use some of these services while 48% state that 1 of 2 of consumers uses insurance fintech service, also referred to as an insurtech service. 

As the same source informs, among the top reasons for using fintech are attractive fees and rates. Let’s see how fintech is actually changing the world.  

How Is Fintech Changing the World?

Financial technology has appeared as the solution to the ever-growing demand for better, securer, and cheaper services. Fintech companies evolve to meet customer expectations that are continually changing during the last few years. Below are the most interesting cases of how fintech is influencing the world.

Financial Products Are Now Offered Even by Non-Financial Organizations

Today, not only banks can offer financial products and services. Healthcare or e-commerce industries where companies possess a large number of assets. Besides, they have already managed to establish strong relationships with their customers. Thus, they leverage the fintech technologies to build and offer financial services for their clients. For example, Alibaba, Amazon, Shopify are providing loans to their customers and supply chains. By implementing blockchain-enabled products that reduce payment fees, many startups can streamline their marketing campaigns and obtain more customers. 

Insurance harnesses the potential of innovative technology by offering fitness bands to get health insurance at lower costs. Thousands of businesses establish partnerships with fintechs to provide credit to people consuming their services. 

In-built Financial Services Are Driving the Market

Often, embedded fintech services can become a real differentiator for your products. For example, Airbnb stands out of the crowd from other renting platforms by providing $1 mln host liability. That made the platform one of the most trusted among a great number of hosts. 

Some educational platforms like a coding school Lambda teach their students for free. And once a student gets hired, such schools get paid. Fintech provides many chances and opportunities for different people to get access to extensive knowledge and skills. 

Fintech Is Unlocking New Capabilities

Mobile banking and digital payments make it possible for millions of people to access financial services that were never before available. For example, fintech is becoming a real game-changer in sub-Saharan Africa, where people have a low level of financial literacy. Today, we can observe that efforts are made to use fintech for consumers to pay their insurance premiums and get pension payments in some African countries. These countries can also benefit from using fintech to reduce cross-border remittances that are now considered the highest in the world.  

Moreover, Fintech products can also attract young people as they prefer online banking to traditional banking. Generation Z likes internet payments and is indifferent to deposits. The needs of young people will define the development of fintech products and services. That’s because these people are the largest segment of their target audience. These consumers show their significant need in more transparent, securer, and more accessible services. 

What’s Coming For Fintech and Blockchain In The Near Future

According to Business Insider, the most promising technologies for fintech are artificial intelligence and blockchain. They have the biggest impact on the industry. In turn, blockchain will likely allow financial services to solve the problems associated with compliance, processes, and onboarding. 

Among the largest challenges that financial institutions meet in the adoption of blockchain is regulation. Thus, many banks start creating strategies to meet this major challenge: keep up-to-date with regulatory news, and be ready to change their course if needed. 

As digital transformation continues, more and more areas of application for both fintech and blockchain are being discussed daily. Many companies already apply some of the blockchain capabilities to improve their operational processes and software systems. A lot of ambitious projects like Facebook’s crypto payments Libra arise. The latter is being designed to be a completely peer-to-peer platform for fast payments via mobiles at low or no fee. By using it, you won’t be required to have a bank account or a credit card. 

Another exciting project called Venus by Binance is going to see the world. The founders are establishing partnerships with the government to mitigate the risks of regulatory issues. This project will be focused on unbanked countries to help people get secure and quick financial services. 

The popularity of blockchain in fintech keeps growing. You should think of this as a great opportunity you can seize right now, either you are a large corporation or a small startup. However, before implementing any of the blockchain fintech solutions, you should follow some basic steps. Below are some general recommendations to consider:

  1. Start with exploring the fintech and blockchain markets. You should make a list of trusted sources that provide the most up-to-date information about the sphere of your interest. Follow these sources, read them regularly to find out the hottest topics on blockchain and fintech.
  2. Conduct business analysis to discover how you can enhance your processes with technology. Consult with the specialists to identify the technology that is best suited for your business needs.
  3. Find a reliable team that can develop, test, and implement the required technology. 

The Role Of Software Testing In FinTech

Any fintech solution needs to be tested before being deployed. Testers should actively collaborate with developers and PMs to create effective testing strategies. First off, QA processes in fintech should be well-defined to ensure security, scalability, high performance, and compliance.

Software testing in fintech includes the same types of testing as in other industries: 

  • Security and penetration testing to avoid various vulnerabilities of the system in the future 
  • Data integrity and validation testing to be prepared for appropriate data migration. 
  • Usability testing to check how user-friendly the system is
  • Functional testing to test how well requirements are aligned with the realized features and  functionalities 
  • Performance testing to verify that the system is able to work under the load

Testing of a fintech solution should be distinguished from testing of other software. That’s because fintech applications have a certain range of peculiarities:

  1. Sensitive data and monetary transactions
  2. Multiple environments for testing
  3. Integrity of databases
  4. Payment gateways
  5. Multi-factor authentication
  6. APIs and open APIs

All these things impact the testing plans and strategies, and your testing team must possess knowledge in the financial industry.

How Can Apphawks Help You?

We at Apphawks provide all types of manual and automated testing for blockchain fintech companies. We deliver professional testing services for websites, e-commerce platforms, SaaS, AR & VR applications. 

Apphawks is focused on reducing clients’ costs for quality assurance. By acquiring our services, you can mitigate the risks of implementing any software solution within your organization. Our cooperation with customers is completely transparent as we provide a complete package of testing, project documentation, and regular reports.

We are quite flexible and offer three possible testing plans: Fixed Price, Time & Material, and Dedicated Team so you can choose the one that suits your needs, scope, and budget. Feel free to send your testing requirements, and we will help you.

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Grzegorz Kłos
Grzegorz Kłos - Apphawks Co-founder
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