The entire landscape of Asset Management industry is changing, and its changing fast. Industry leaders have been suggesting various strategies and ways that asset management industry need to adopt in order to rise above the challenges they face in current environment.
Blockchain technology is the perfect answer to most challenges faced by asset management industry. Where we talk about asset management, or the broader category of managed financial services, wealth management, the advantages offered by Blockchain or DLT applies to them all.
The biggest concern faced by any industry while adopting blockchain is its potential to cause imminent disruption. While Blockchain will be highly beneficial for asset management industry, but will also lead to obsolescence of a few intermediary roles is troublesome, and rightfully so. The realization that is needed is not to confuse obsolescence with extinction. The new and improved ecosystem offered by blockchain driven asset management will simply find newer and more rewarding opportunities for roles that were eradicated to serve their clients. It’s all about adoption.
Major Advantages of Blockchain software for Asset Management Industry:
- Improved Security: This is on top of the list for a reason. DLT has the ability to not only improve the privacy and security of data but to completely change ways in which data is stored and accessed. Blockchain’s immutability and its core functionality of distributing data across multiple nodes will eliminate the chances of data breach. Data tampering will also become nearly impossible due to DLTs characteristic of grouping transactions into blocks of data, then encrypting the said block and then linking each block to others.
- Improved Speed: Apart from security, blockchain can be fast. A custom development private blockchain can provide almost real time speed for asset tracking. This enables manages to gain quick insights into data changes that can affect client’s portfolios.
- Operational Efficiency: The distributed structure of DLT will lead to exponentially enhanced speed for B2B transactions. Blockchain is nothing but a database that is distributed across multiple nodes. These so call nodes are in short, simple computer systems. Since these nodes are systems that will be run and operated by multiple institutions, the exchange of data will be pretty much instantaneous. Institutes will just need to update their own records instead of waiting on data to be updated by others. Blockchain’s ability to validate and authenticate data automatically across all the nodes will do the rest.
- Client KYC and Onboarding: Asset Management industry is highly regulated. Getting a new client on-board while conducting all checks and validations can be extremely time consuming and pretty tedious. Although, blockchain will not inherently expedite this process, it has the ability to provide the basic structure for developing a solution that can do so. By working together, the entire industry and all its stakeholders can build the necessary infrastructure that will lead to fast sharing of information needed to drastically cut down on on-boarding time.
- Streamlined Trades and Portfolio Management: Adoption of DLT’s data structure will lead to building extremely organized portfolio management with improved and enhanced communication between all parties. In the current asset management system, it takes multiple days for a trade to settle. DLT will eliminate the difference between a trade and the clearing of a transaction. This will lead to elimination of counterparty risks.
- Regulatory Checks and Compliances: As we know, each transaction on a blockchain needs to be verified by all parties, meeting compliance demands becomes easier. The immutability of DLT will lead to the extinction of creating audit trails. Every block will become a part of the audit trail and will be able to provide all the financial details of all the transactions as well as marking them with unchangeable or unalterable data and time stamp along with a digital signature.
Adopting Blockchain for such a vast industry can be challenging. Replacing already existing yet obsolete (in most cases) legacy system even more so. This process will require a partner that not only understands the in and outs of DLT, but also understands the applications of DLT in different industries such as asset management and etc. At StudioFintech, we are such a partner. A company born out of passion and love for Fintech and Blockchain, we work with fortune 500 companies including leading banks, hedge funds, etc. across the globe in providing tailor-made and bespoke Blockchain based solutions. Our recent projects are a proof of our expertise in various verticals of blockchain and fintech development.
Contact us to create custom, scalable and secure blockchain and fintech applications.