Blockchain Applications in Retail Finance | Use Cases in 2023

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How can Blockchain and Digital Assets help Retail Finance?

Retail finance, as other sectors in finance, is facing numerous challenges such as low margins, high competition, inefficient processes, paperwork, perilous data breaches, and high fraud rates, among others.

These problems can be solved in a variety of ways using blockchain technology and digital assets. First, the transparency of the blockchain can boost KYC/AML compliance, prevent fraud, and facilitate data exchange. Second, digital assets can ease international trade, lower transaction costs, and provide unbanked people access. In addition, smart contracts have the ability to automate the performance of financial contracts, increasing effectiveness and lowering errors. 

There has been a significant rise in market size of blockchain within the financial services sector, with a steady growth in adoption over time. Market analysts predict that the size of the worldwide blockchain in retail banking is anticipated to reach $37.8 billion by 2028.

With such impressive growth expected in the coming years, we have identified four key application areas of Blockchain and Digital Assets in the retail finance sector for you to understand its current landscape.

Blockchain and Digital Assets Application in Four Areas

Customer-facing

From a customer’s point of view, blockchain and digital assets can reduce transaction costs, increase transparency and security,  and provide access to people excluded from traditional finance. Some typical application areas are listed below:

  • Digital Assets Platform (DAP)

DAP is a type of online marketplace or platform designed to provide users with a secure and reliable platform for digital asset transactions. It can facilitate the trading, buying, and selling of various types of digital assets. 

Real-world Application: DBS FIX Marketplace 

FIX Marketplace is Asia’s first fully digital and automated fixed income execution platform, where issuers can directly connect with investors on the platform at their discretion. The objective is to create more inclusive and accessible markets for issuers and investors. Find more on this project on CFTE’s analysis of blockchain projects.

  • DeFi Leading

DeFi is a new financial system built on secure distributed ledgers that enables peer-to-peer transactions without intermediaries. DeFi lending offers a more inclusive, accessible, and transparent financial ecosystem than traditional finance.

Real-world Application: EthicHub

EthicHub is a decentralised finance platform, using blockchain technology to provide secure, transparent, and low-cost financial services to farmers, who often lack access to traditional banking. The objective of it is to connect small-scale farmers in developing countries with global investors directly to eliminate intermediaries and reduce costs. Find more on this project on CFTE’s analysis of blockchain projects.

Infrastructure

Blockchain applications in infrastructure can enhance retail finance operations by enabling secure data sharing, faster settlements, improved transparency, increased efficiency, and a better customer experience through automated and streamlined processes. Some typical applications are listed below:

  • Digital Assets Trading Platform

A digital asset trading platform connects directly to crypto asset exchanges worldwide. It makes it simple for users to buy and sell crypto assets and other security tokens using a single account or platform.

Real-world Application: State Street Digital 

State Street Digital provides an integrated business and operating model to support the entire digital investment lifecycle, including pre-trade, trade and post-trade. The aim of the project is to help clients make informed investment decisions. Find more on this project on CFTE’s analysis of blockchain projects.

  • Retail CBDCs

A Retail CBDCs platform is a digital platform that enables the issuance and use of retail CBDCs. These platforms are designed to facilitate the storage, exchange, and use of CBDCs by the general public for everyday transactions. 

Real-world Application: MAS Project Orchid 

The Project Orchid system uses smart contracts to facilitate the issuance and transfer of CBDCs, providing a transparent and secure way to conduct transactions. It aims to build and test a prototype system for issuing and transacting with retail CBDCs and offer a secure and efficient way for consumers to make payments. Find more on this project on CFTE’s analysis of blockchain projects.

Compliance and Risk

Blockchain in compliance and risk management for retail finance includes enhanced security, immutable record-keeping, improved KYC/AML processes, smart contracts, and faster due diligence. It reduces risks and costs, improves compliance processes, and provides a secure service to customers. Some typical applications are listed below:

  • KYC/ AML 

KYC (Know Your Customer) and AML (Anti-Money Laundering) are regulatory compliance processes that financial institutions and other businesses use to verify the identity of their customers and assess the risk of money laundering, terrorism financing, and other financial crimes.

Real-world Application: KYC-Chain 

KYC-Chain is a blockchain-based platform that provides KYC and AML compliance solutions to regulated businesses. The platform uses blockchain’s immutability and transparency to streamline compliance processes. The objective of it is to streamline customers onboarding processes and enhance users compliance with regulatory requirements. Find more on this project on CFTE’s analysis of blockchain projects.

  • Document Authentication

Blockchain-based document authentication systems use a distributed and decentralised ledger to record information about a document. Some applications are HASH, smart contract and shared databases. 

Real-world Application: PKO Bank Polski

PKO’s document authentication system is a solution that uses blockchain technology to verify and authenticate the authenticity of documents. The objective of the project is to provide a secure and tamper-proof method of verifying the authenticity of documents, such as contracts, invoices, and other legal agreements. Find more on this project on CFTE’s analysis of blockchain projects.

ESG

Blockchain can help retail finance in ESG initiatives by increasing transparency and inclusiveness, automating compliance, improving ESG data reporting, enabling tokenization of ESG-related assets, and facilitating sustainability-linked loans. It allows secure and decentralised access to ESG data, incentivizes borrowers to improve ESG performance, and offers more sustainable investment options for customers.

  • Impact investing

Impact investing is an investment strategy with an aim to generate specific beneficial ESG effects in addition to financial gains.

Real-world Application: Singtel Digital Sustainability-Linked Bond (SLB)

Singtel SLB leverages blockchain technology to enhance the transparency and integrity of the bond issuance and management process, and finance Singtel’s sustainability initiatives. The blockchain-based platform enables Singtel to report sustainability performance to stakeholders, increasing transparency and accountability. The aim of the project is to bring the sustainability benefits of digitalisation to everyone. Find more on this project on CFTE’s analysis of blockchain projects.

  • ESG Blockchain Ecosystem

The ESG blockchain ecosystem aims to address the challenges of traditional ESG reporting and sustainability management by providing a distributed and decentralised platform for stakeholders to collaborate, share, and verify ESG data.

Real-world Application: Celo Foundation

Celo promotes ESG practices through blockchain technology. Celo’s energy-efficient network uses Proof of Stake, and its platform enables users to make ESG-friendly transactions using digital currencies. Its aim is to promote a more socially and environmentally responsible future using blockchain technology. Find more on this project on CFTE’s analysis of blockchain projects.

Conclusion

Blockchain technology is revolutionising the retail finance industry by providing secure, transparent, and efficient solutions. Understanding the potential of blockchain and digital assets is becoming increasingly essential for individuals and businesses to stay competitive in the digital age. Therefore, it is crucial to stay updated on the latest developments and learn more about the potential of blockchain technology and digital assets.

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