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Blockchain technology is receiving its share of attention over the past few years. The uses of cryptocurrency have extended to several industries including financing and insurance. But, as is the case with all change, crypto has been causing some disruption.
Traditional banks haven’t been too happy with the introduction of crypto. This isn’t surprising considering bitcoin is reducing dependency on traditional money. It’s now easier than ever to buy bitcoin online and trade it for goods and services.
The dramatic shift to virtual currency has reduced the influence of traditional banks. So, it’s natural for the finance sector to feel sidelined by cryptocurrency. But, this can all sound like an overstatement if you’re not aware of what’s happening in the industry.
Let’s take a look at how crypto will affect the finance industry in the year 2023.
It Improves Payment Systems
Many people still prefer to use traditional banking over decentralized systems. But, many people are having problems with the previous financial systems. There is a lot of room for improvement in the framework of centralized banks all over the world.
The existence of problems in these systems contributed to the rise of cryptocurrency. Trillions of dollars languish in bank accounts due to slow transfers. There are complex formalities attached to the transfer of money between bank accounts. Besides, there are also high fees associated with traditional bank transfers.
So, it’s no wonder that people have been looking for quicker and cheaper alternatives. This is where cryptocurrency comes into the picture for the finance industry. It’s far easier to pay for goods and services using cryptocurrency like bitcoin. It’s also easy to transfer your bitcoin to other people using a decentralized network.
The good thing is that it’s easy to buy bitcoin online and transfer it. Bitcoin4u allows users to buy bitcoin instantly with minimal formalities. You would need to enter only a few basic details to own your first bitcoin. You can then add your bitcoin to your crypto wallet and start making transactions.
This is why crypto is far more convenient for making payments than traditional banks. The previous financial system relied too much on documentation processes. It would often take banks a few days to verify account holder details. Then, it would take them a few more days to process the payments you’d like to make.
Cryptocurrency has eliminated the need to withdraw cash or use credit cards. With cryptocurrency, you can buy bitcoin with a debit card or credit card. You can use your crypto wallet to transfer money to individuals and businesses as well.
It Improves Clearing and Settlement Systems
Another advantage of using crypto is that it makes clearing and settlement easier. Existing bank protocols can make clearing and settlement lengthy processes. But, crypto relies on a distributed ledger system for these transactions.
This allows you to settle transactions directly with the parties you want to deal with. This would reduce the time and costs associated with these transactions. The average bank transfer takes about 3 days in most countries. This can be convenient for many businesses that want to maintain positive cash flows.
Banks also charge considerable processing fees on these transactions. So, the party transferring funds has to bear the charges for large transfers. Some blockchain service providers focus solely on clearance. They have a dedicated system to ensure fast fund transfers.
These service providers integrate their processes directly with banks. So, they don’t have to set up a separate network to transfer funds across the world. Also, these service providers are known to settle cross-border transactions more quickly than banks. So, it’s no surprise that businesses are choosing them over financial institutions.
Using the same ledger system as banks makes money transfer a more efficient process. It also reduces the costs associated with clearance and settlement. Businesses around the world are finding this system more convenient for their transactions.
This is slowly but surely disrupting existing banking processes for settlements. But, since crypto is an innovative introduction to finance, this was to be expected. What matters now is that those that have bitcoin are finding fund transfers easier. You can experience the same if you choose to buy and sell bitcoin online.
It Makes Fundraising Easier
The introduction of crypto has also made it easier for businesses to raise funds. It’s not always easy to raise capital for new ventures if you approach traditional banks. Entrepreneurs will tell you that raising funds through venture capital isn’t easy.
It’s usually a long and grueling process, especially in the current economic climate. Venture capitalists demand more than a little assurance that you can pay them back. You would need to complete several formalities to make sure you receive the funds you need.
If you own a startup, it can make fundraising an uphill battle. Blockchain companies can make it much easier for you to raise the funds you need for your business. Public blockchains like bitcoin offer you ICOs (Initial Coin Offerings). These are like IPOs but are so more convenient to raise money with.
An ICO involves selling tokens or coins in exchange for funding. The value of these tokens is supposed to be tied to the value of the issuing company. Investing in tokens would allow you to bet directly on the value of a company. This is why investors are finding crypto investments better options than venture capital.
Also, it helps that there’s no hassle of allocations and subscriptions with ICOs. Investors simply provide companies with funds in exchange for bitcoin. You can even buy bitcoin with eTransfer if you’re interested in investing in other companies.
These are some of the ways in which crypto is changing the world of finance. But, it’s important to note that this disruption seems to be for the better. Progress in the finance industry will spell progress in various other industries.
Investors are finding it more convenient to invest in businesses using crypto. This could give an impetus to the manufacturing and service sectors as well. So, it’s better to look at crypto to progress, not disruption. It certainly looks like it’ll do more harm than good in the long run.