Ritesh Srivastava, BharatPe on how data analytics, blockchain is revolutionizing the fintech sector, ET CIO
Data analysis is one of the main pillars of any business today, as it is the key basis for a company’s understanding of its customers. With the rise of the internet and increased amount of time spent on social media and smartphones, data has emerged as the most important source of information to drive customer acquisition, better understanding of customer behavior and forecasting.
The story is no different in the fintech industry. In recent years, due to the increasing amount of data generated by financial transactions, data analysis has become an important tool for Fintech companies trying hard to capture the attention of customers, in this era of information overload.
Advantages of data analysis in Fintech
Fintech companies generally have access to large customer data sets, and through data analytics, these data sets are leveraged to gain invaluable insights into consumer behavior, market trends and other critical data points that can positively impact the business. It is a well-known fact that the better a company understands its customers, the better it can serve them with customized and relevant solutions.
Fintech companies also use data analytics to improve their services in several ways. With their ability to process large data sets, fintech companies can customize services, create tailored customer experiences and products that meet the specific needs of each customer. They can fine-tune their offers, and in turn make them unprofitable for customers.
In terms of risk management practices, data analytics is widely used to perform proactive risk assessments, identify fraud and perform continuous monitoring. By using data to assess creditworthiness and other risk factors, Fintech lenders can improve their risk management practices by reducing exposure to bad debt and other losses. By using data analytics to identify patterns of fraudulent behavior, companies can also take proactive steps to prevent fraud and protect customer assets.
Data analytics can also help Fintech companies identify new market opportunities. By analyzing consumer behavior and market trends, companies can identify areas where there is demand for new products and services. It can help drive growth and revenue for the company and play an important role in preparing the short- and long-term strategy for the company.
Blockchain – A powerful technology
To explain simply – blockchain technology is a combination of various mathematical, cryptographic and economic principles to maintain a database between multiple participants without the need for third party validation or reconciliation. Simply put, it is a secure and distributed ledger.
In a blockchain, there is no single authority that controls the information, and therefore the data cannot be changed. In addition to being secure, Blockchain has the potential to create a revolution in financial inclusion by serving billions of “unbanked” people worldwide, without having to go to banks or intermediaries for these types of services. With its distributed, decentralized, transparent and immutable digital ledger technology, Blockchain empowers FinTech with new freedom and security.
Advantages of Blockchain in Fintech
Blockchain creates new financial solutions that scale faster and are cheaper, safer and more accessible to ordinary people. With the ability to monitor the performance of digital assets in real time, Fintech companies can offer personalized services that suit specific needs.
In terms of volume and speed, blockchain platforms can manage high transaction volume without slowing down, providing a viable competitive advantage to Fintech companies. On a blockchain platform, financial transactions take seconds, thus enabling businesses to save significant amounts of time and money.
Blockchain technology also helps reduce a fintech’s operating expenses. The smart contracts in the blockchain reduce the need for labor and other related operating costs leading to cost savings. The best part is that the data produced by the blockchain is confidential. The data produced by Blockchain technology is distributed across a global network of computers, and is inherently more secure than centralized systems.
The merger of FinTech with blockchain has given rise to DeFi (decentralized finance) DeFi companies, which are FinTech with blockchain elements, make financial products and services available to anyone anywhere without the involvement of banks or other third-party firms. In the decentralized financial market, transactions take place 24/7 in near real time, without intermediaries.
The use of blockchain technology in DeFi enables faster, cheaper and more secure transactions than they would with human intervention. Since DeFi works through a P2P network, eliminating intermediaries and allowing decentralized banking, it has the potential to be a game-changer for the unbanked people of the world, who for one reason or another do not have access to traditional financial services.
The integration of data analytics and blockchain technology is revolutionizing the fintech sector. From preventing fraud to data sharing to finding new market opportunities, the possibilities fintech companies can derive by combining these two technologies are endless. This powerful combination has the capacity to transform the lives of billions of people worldwide by enabling the unbanked to access financial services and thus promote financial inclusion.
The author is Chief Data Officer at BharatPe.
Disclaimer: the views expressed are solely those of the author and etcio.com does not necessarily subscribe to it. etcio.com shall not be responsible for damages caused by any person/organization directly or indirectly.