Market Trends of Fintech Blockchain Industry
Insurance Segment to be the Largest End-user Vertical
- Blockchain technology is revolutionizing the insurance industry by transforming operations and providing various benefits, such as cost reduction, enhanced customer experiences, increased efficiency, greater transparency, and more. This represents a significant opportunity for fintech companies and insurance providers ready to embrace this transformation.
- One of the critical advantages of blockchain is its ability to provide transparent and trustworthy information about transactions, making it an ideal repository for data that is crucial in verifying the authenticity of insurance claims. This instills trust in the process and enables insurance providers to make accurate decisions about the percentage of the claim that can be covered. According to Swiss Re, in 2023, countries like the United States and Denmark ranked with an index score of 1 in insurance penetration.
- Furthermore, with the rise of IoT technology, the amount of data generated by interconnected devices is increasing exponentially. This requires a technology that can efficiently manage large volumes of data. Blockchain enables insurance providers to manage these complex networks securely by allowing devices to communicate and manage each other peer-to-peer rather than relying on expensive data centers for processing and storage. This approach is much more cost-effective and is expected to drive the market's growth in the future.
- The cloud-based fintech blockchain services are expected to become more secure, thus enabling enterprises to respond faster to security threats, focus on mitigating business risks, become compliant, and save on-premise infrastructure investment. For multiple large enterprises with highly regulated IT infrastructure, the decision to house their software and services on-premise has been clear. The solutions deployed on these in-house servers are also more accessible and under the company's direct control, which provides reliability compared to cloud servers.
- As companies expand over time, it becomes necessary for them to scale their solutions to support crucial business operations. However, it is sometimes difficult for multiple companies to manipulate the existing on-premises solutions to support newer applications, integrations, and updates.
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North America is Expected to Witness Significant Growth
- Due to the multiple benefits of blockchain technology, the financial industry, which includes banking, financial services, and insurance, is focused on it. For example, major banks in the United States are investing in blockchain technology, including JPMorgan and Bank of America.
- The insurance industry is involved in various activities, including sharing data that is modified or updated by multiple parties. As a result, blockchain technology can benefit the insurance industry. As early technological adaptors, North Americans have significantly embraced blockchain in the insurance industry.
- Smart contracts allow blockchain users to transfer anything of value transparently without the intervention of a middleman. Smart contracts, like physical contracts, define the rules between two parties. Unlike traditional contracts, smart contracts can track insurance claims and hold both parties accountable.
- The COVID-19 outbreak accelerated the demand for digital transformation in the banking industry. As people were forced to use online services and limit their bank visits, many banking companies collaborated with fintech vendors to offer differentiated and competitive services. Digital customer experience is the primary area of competitive advantage and is likely to drive the market in the future.
- One of the most significant benefits of blockchain technology offered by fintech vendors is the reduction of fraud and cyber-attacks in the financial world. Blockchain helps to curb data breaches and other fraudulent activities by enabling fintech businesses to share or transfer safe and unaltered information through a decentralized network. This added security and transparency could help build trust between financial institutions and their customers.
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