Often, blockchain is mentioned alongside cryptocurrency and with Facebook’s plan to launch a new cryptocurrency, Libra, which may reform the face of global finance as we traditionally know it, it is imperative to realize blockchain’s impact on the financial sector.
Blockchain is formally known as a digital ledger technology (DLT), which primarily stores transactions in a shared platform. Consequently, some say that blockchain is the next transformative technology after the internet.
For the financial sector, blockchain could potentially reform processes for large financial corporations, by decreasing costs, increasing efficiency, establishing transparency, and more.
What is blockchain, really?
Blockchain can be described as a “series of connected blocks”, or a chain of blocks, as its name indicates. Every one of these blocks holds data that is required for a specific transaction, and as every transaction is processed, new data is stored as a block and added to the chain – forming a blockchain.
Altogether, these blocks form a database that carries a large number of records. What distinguishes blockchain from traditional databases is that it does not exist separately. That is to say, traditional databases exist as separate entities of data; as for blockchain, it can be shared as a single digital ledger, viewed by multiple authorized parties or individuals.
To ensure that the data is protected, secure, and true, every block must be validated by each individual or participant involved in authorizing the data. Therefore, no changes can be made without the approval of every individual; hence, every transaction will require somewhat of a notary for verification before it is processed. This chain allows for the production of single, secure, authorized and updated information that can be accessed by all participants involved.
How blockchain is transforming finance
In a 2018 survey by Ernst & Young, 58% of leaders in finance regarded “digital” as one of the main four factors that are disrupting the role of a CFO. The report explains that blockchain holds a substantial component of this digital formula, so far in so that it is “shaking up the finance function”, and while it remains in its budding stages, it could potentially “revolutionize the way the finance function operates.” 
In a recent survey by Robert Half Finance & Accounting  of more than 2,000 finance leaders in over 20 of the USA’s largest metropolitan areas on the integration of blockchain in the accounting and finance departments:
- 30% believe there will be more cross-departmental collaboration with IT
- 36% said they will need to expand their skill set to adapt to new tech
- 34% predict that specialized accounting will increase in demand
As for the integration of blockchain in large corporations and financial operations, a recent report by KPMG found that it will:
- Increase efficiency. Blockchain has the potential to significantly increase efficiency by up to 40% as per the report, and this is because a single ledger that is synchronized and shared on one network would eliminate the need for reconciliations because there will be only one version – described as a “single version of the truth”.
- Establish higher transparency. All participants or parties in a ledger will be updated on its status, removing the need for incessant follow-ups. For example, in trade finance, managers will be able to view the shipping status of goods, and review transactions as they happen, thereby reducing settlement time significantly.
- Improve accuracy, reduce fraud. Because data will be available and visible to all involved parties, this can reduce the possibility of fraud, as well as show compliance through an audit trail.
- Enhance the customer experience. According to the KPMG report, there will be a 25% improvement in customer experience due to quickened processing through digital channels. With blockchain, companies will be able to share information and service customers faster than before.
How fintech is adopting blockchain technology
The applications of blockchain in fintech are numerous, and have the potential to transform the financial sector as we know it.
More and more fintech companies are following the trend. Investera, an investment management solutions company, helps its clients generate transactions quickly; all transactional activity is translated into double-entry accounting postings, and transaction advices for all processes are maintained in the system.
All in all, blockchain can be a stepping stone for the financial sector, coined by some as the second internet movement, which will make transactions more secure and transparent while eliminating fraud, increasing efficiency, and improving customer service.
You can discover more insights on the emerging trends in finance on our blog.
 EY, Blockchain: How this technology could impact the CFO, May 2018
 Robert Half Finance & Accounting, The Rise of Blockchain and Cryptocurrency, August 2018
 KPMG, Blockchain and the future of finance, 2018