As blockchain enters innovation roadmaps, industries are leveraging the technology to solve big problems. Fintech blockchain applications have surpassed growth expectations, with 77% of financial services expected to adopt blockchain in some form by 2020.
Fintech blockchain projects prioritize more than just UI improvements. Blockchain UX is also dependent on a solid backend for:
We’re slowly starting to see more fintech companies adopt blockchain. Banks, like CitiBank, are embracing cryptocurrency to give customers more secure payment options. Tech innovators are using fintech blockchain to automate supply chains, authenticate ownership, and asset transfers.
Below we talk about the advantages and risks of fintech blockchain, as well as how user experience comes into play.
What is Fintech Blockchain?
From automated smart contracts to soaring speculation on cryptocurrency, blockchain is causing a stir in fintech. Luckily, you don’t need to be highly versed in the technical aspects of blockchain to understand how it can transform the financial industry.
A few things to know about fintech blockchain:
- It’s secure and incorruptible
- It enables transparency
- It’s built on trust
- It’s decentralized
More often than not, fintech blockchain apps use tokens to perform actions. Tokens are a form of digital currency -think Bitcoin- used for making transactions on blockchain.
If you’re thinking these principles make blockchain an ideal choice for a banking platform, you’re absolutely correct.
Blockchain’s secure, public-facing ledgers make it a perfect fit for the fintech industry. Transactions made on a blockchain are validated and authorized within their apps to keep security concerns at a minimum.
Read on to learn more about how fintech blockchain will shape the future of finance. Or, if you want an in-depth read into the fundamentals of blockchain, check out our in-depth blockchain guide.
How Blockchain Impacts the Financial Industry
Although blockchain technology is still finding its footing, financial experts recognize its potential to drive innovation beyond cryptocurrency.
Blockchain’s inherent security, authentication, and exchange benefits promise disruptive fintech upgrades.
A principal advantage of blockchain’s decentralization is that it makes the network extremely secure.
Hackers usually target centralized network points during a cyber attack. Because blockchain is decentralized, these are nonexistent.
Financial institutions can breathe easy knowing that platforms and applications running on a blockchain are nearly impossible to hack.
Data is further secured with the use of hash functions. Hash functions are permanent with undecipherable send messages, meaning that they cannot be tampered with or overwritten.
Since all inputted data is publicly accessible by all users, it’s easy to identify changes in records. All ledger actions can be double checked against the majority of nodes.
Financial institutions prioritize world-class security, but that doesn’t mean their customers are safe. A misplaced drivers license or a payment at the wrong card reader can lead to identity theft.
The decentralized nature of fintech blockchain reduces the risk of fraud, for both financial institutions and their customers.
All transactions are securely authenticated with the use of hash codes. Because every hash code is unique, they are used to:
- Eliminate risk of data duplication
- Reference user identity credentials
Blockchain provides further security measures by requiring multiple signatures before funds can be transferred from certain addresses.
Blockchain applications in fintech promise several ways to make the industry leaner. We can soon look forward to:
- Shorter compliance resolution times.
- Reduced middle-of-the-stack costs for certification and reputation assessments.
Financial institutions also use blockchain to reduce other financial processes with self-fulfilling smart contracts. Drawn-out processes will soon boil down to to one or two-step functions. That’s great fintech UX.
The decentralized blockchain platform also eliminates the need for an intermediary when cross-referencing user credentials, enabling processes to run faster at greatly reduced costs.
As with any emerging technology, fintech blockchain comes with certain risks that early-adopters must prepare for when considering making the transition.
Slow and Steady
Blockchain is a young technology. Best practices are still in development, users are still learning how to interact and gain value from decentralized applications. According to the Gartner technology hype cycle, mainstream users are just starting to take notice.
If you’re diving into blockchain, you need to first understand when blockchain for financial services should be incorporated into a strategy and when it shouldn’t. Blockchain design, development, and onboarding of users take time. In some instances, it doesn’t necessarily make sense to reinvent the wheel.
Since blockchain and cryptocurrencies are still fairly new players in the financial ecosystem, there are many cases where federal laws can’t keep up with the technology. As a result, regulations, and bans have been placed in some countries until the government has a stronger understanding of the impact blockchain will have on the financial sector. Investors hedging bids on financial blockchain projects should conduct proper research before dedicating a bulk of their assets to unfamiliar waters.
Fintech Blockchain and UX
While all apps demand an easily navigable UX, blockchain apps require slightly more attention because of the high technical barriers that result in across-the-board issues in UX and usability of these products.
By nature, fintech platforms, websites, and applications received, transmit, and store capital assets of high value and priority. Blockchain applications and platforms dedicated to solving problems in the financial technology space need to deliver a UX that makes customers feel comfortable and confident.
Our Head of Digital Studio, Cody Musser, touches on UX problems that many fintech blockchain apps encounter,
“Similar to early internet technology we’ve found the use cases for the tech, but in many ways we haven’t landed yet on the reduction of friction in and around the technology to ease the experience for non-first adopters.”
Benefits of Strong UX
Transparency is a core component of blockchain, which makes it an excellent platform for fintech blockchain applications. Users have free reign to view the constantly updating public databases supported by blockchain, and they can quickly make peer-to-peer transactions in a secure environment.
Fintech blockchain UX should make the following ideas evident to the user:
- What functions can be performed within the app
- What data is accessible and when that data was updated
- How to navigate the app and perform specific actions
While blockchain promises vastly improved security, most of those processes happen on the backend. Users won’t inherently assume your app can keep their assets secure, proof of value must be demonstrated.
The transparency of fintech blockchain is huge news for investors, banks, and consumers, so it’s important that the UX reflects security of the technology.
Fintech users want to feel like they’re in control of their assets, and the only way to give that control is through a strong UX. Rather than fumbling around a clunky UI or wondering how different functions work, users should be empowered to use their app to its fullest potential.
With fintech blockchain comes with an entire ecosystem of capabilities, along with a highly technical dictionary to learn. Take tokens, for example. While tokens initially bring Bitcoin or Ethereum to mind, there are a wide variety of uses for tokens beyond cryptocurrency.
- Physical assets (real estate)
- Authentication of high value
- Clear transfer of titleship
An educational UX helps newer users understand the different types of tokens as well as real-world examples for comparison. Consider using your UX to highlight what data can be accessed using specific tokens, or the wide variety of non-currency investments available.
Risks of Poor Fintech Blockchain UX
At the end of the day, there’s no excuse for a poorly designed platform or website.
Fintech blockchain apps are not granted leniency for poorly designed user experiences. An ineffective blockchain UX wastes time for all parties involved invokes frustration and user drop-off and runs a high risk of staving off new users.
Missing the Curve
No business wants to let their competitors get too far ahead, and financial institutions are already making strides in the world of fintech blockchain UX:
- Goldman Sachs
- Bank of America Merrill Lynch
Digital wallets aren’t just rivaling traditional banking; they’re overturning it. Falling behind creates a gap as digital wallets and e-commerce continue to grow in popularity. Specific sectors, like online banking and financial services, are integrating fintech blockchain onto their platforms while simultaneously warming up users to unfamiliar UX.
Examples of Fintech Blockchain
Mastercard features blockchain API for its users, enabling them to integrate various blockchain applications with a low technical barrier. Businesses can benefit from these integrations through the use of automatic processing of cross-border B2B payments through the use of smart contracts.
Decentralized Loyalty Programs
Integrating fintech blockchain with cryptocurrency let users can easily swap reward points from different retailers.
Rewards are highly tailored to each consumer’s purchasing habits, encouraging them to make larger purchases more frequently. Qiibee offers a foundation for decentralized loyalty programs by enabling businesses to combine and trade loyalty tokens.
Trade apps like Gatechain offer incredible benefits by reducing costs along the supply chain and streamlining the time it takes items to ship.
Fintech blockchain is used to:
- Automate financial parts of the trading process.
- Secure transactions.
- Store permanent financial records.
By hitting these industry pain points, fintech blockchain promises to make much-needed improvements to trading industries.