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Analysis of the future of finance and blockchain with Oliver Camponovo

15 November 2021
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Tempo di lettura: 3 minuti

FINANCE BLOCKCHAIN OLIVER CAMPONOVO - The only thing that comes to mind when we hear the term "Distributed Ledger Technology (DLT)" is "Bitcoin." Bitcoin is merely a small fraction of the massive DLT pool, which will astonish you. Other examples of public DTL technologies are Ethereum and all the EVM chains that have allowed for smart contracts and the development of an entirely new Decentralized Finance infrastructure.

But, first and foremost, what is a Distributed Ledger Technology?

DLT is a technology that has the potential to alter the financial services infrastructure. It provides increased transparency, efficiency, decentralization, automation, cost savings, and other benefits. It will serve as the cornerstone for the financial services infrastructure of the future.

Financial services reimagined

By next year, it is expected that 80 percent of banks will have started initiatives on both public and private DTL. However, there are still many obstacles to overcome because formal legal frameworks do not yet exist, which can be a stumbling block in large-scale adoption. Furthermore, updating the entire financial infrastructure via DLT takes a significant amount of time. Finally, the top DTL resources are unavailable on the market and difficult to obtain.

The question here is whether the investment in DLT is worth all of the hardship.

The solution is straightforward! It enables parties to digitally transfer assets without the use of a "middle" party. Yes, indeed! It is well worth the hype, as it allows for transparency and autonomous business rule execution. Yes, indeed! It's well worth the effort. It reduces risks, speeds up and simplifies transactions, simplifies dispute resolution, and performs binding agreements in real-time. That is why the pain of modernizing financial infrastructure is worth it for DLT


Many improvements can be achieved:

  • DLT makes compliance more manageable.
  • Regulators can access the shared repository and get the data they need.
  • Financial institutions can resolve their disputes themselves without involving a third party which otherwise makes processes lengthy and time-taking.
  • Lenders can also gain visibility on assets which results in better credit decisions.
  • Information irregularity diminishes.
  • It enables real-time monitoring of financial activities.
  • DLT can launch a new era of credit cards.
  • It provides efficient and accurate reporting. Moreover, it also helps the market participants to make more informed decisions.

So, what should financial services companies do now?

Given the massive amount of change that DLT will bring, now is the moment to recognize that there is still much work to be done. Companies must conduct cost-benefit evaluations and develop roadmaps. Legal and regulatory tax guidelines must also be worked out between the financial industry and the government; in Switzerland, the Parliament recently authorized such a new legal infrastructure, making DTL application easier.

Global Payments:

Because DLT offers lower fees, real-time settlement, and rules, it has the potential to flourish in the future of global payments.

Global transactions are currently complicated and expensive, with several steps to complete a process. Manual and repetitive operations are common. The payments are cleared through local clearing networks. Payments are also delayed by weeks and are occasionally refused if the corresponding bank fails to meet certain conditions. Similarly, each party's identity and re-verification takes a significant amount of time.

All of these obstacles can be overcome with DLT. To begin, there exist digital identification profiles, which are sufficient for quick verification. Currency conversion is also simplified, and authorities have access to transaction data.

As a result, DLT is more cost-effective because it eliminates the need for human resources and correspondent banks.

El Salvador, for example, recently created such a system and went even farther by declaring Bitcoin to be legal cash, allowing anybody to receive and send Bitcoin. The economy of El Salvador is still founded on remittances from outside, and the saved commissions of roughly 400 million dollars will be saved by the people and reinvested in the country. Are you shocked that El Salvador's economy is booming?

Processing of commercial property and casualty claims

It is now possible to lower the risk of fraud using DLT. Thanks to distributed ledger technology (DLT), which can help to speed the claim submission process by utilizing smart assets. It is possible to reduce processing time and eliminate unnecessary procedures. With the use of records, any fraudulent action can be quickly discovered.

Not only that, but DLT can make it easier to integrate credible data sources, reducing the need for manual labor.

Syndicated Loans:

Syndicated loans pose a risk of a single customer borrowing a considerable amount. Usually, the lenders are in the form of groups as the borrowing amount is enormous. Once again, the record-keeping functionality of DLT can make this process easy, effective, efficient, and risk-free.

Participation of financial institutions in syndicated loan opportunities can be made more accessible with DLT.

Trade Finance:

Every year, around $18 trillion of trade involves finance! DLT can boost trade efficiency by streamlining the processes involved in trade, such as capital efficiency and faster settlement. It also minimizes the risks as all records are trackable.

“And this is only the start of a global revolution that will shake the foundations of financial infrastructure.

Only those economies, politicians, managers, and individuals that begin to use this technology will be able to stay in the game. Even dinosaurs have gone extinct, so start learning and adapting.”

To discover the banking and fintech trends of 2020, click here

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