Financial industry has evolved over the years and is on the verge of paramount growth from Fintech revolution. Of which Lending vertical of the finance industry takes a lion share of this industry. However, the growth is not consistent across the countries. There are disparities in adoption which Blockchain can answer. One of the reasons of the disparity in lending is the whole infrastructure is centralized, making it difficult to scale. Blockchain, which is decentralized in nature, can help decide the level of centralization one wants to keep for their financial products.
Lending originated simply intending to connect borrowers who need money to the lenders who want to give away money for a profitable interest rate. Blockchain which is inherently P2P (peer to peer) is very much suitable for creating a lending marketplace where borrowers and lenders can connect. Making the whole process of lending right from the origination, fulfillment, settlement, and servicing, etc. much more efficient and trackable. Speaking of trackability, for which the traditional lending industry spends millions on specialized software, can also be done very cost-efficiently via blockchain because at its heart blockchain is just a bookkeeping system with timestamps.
Tokenization of assets like stocks, bonds, real estate, cryptocurrencies, or anything, can make them readily available for collateralization and tracking. Plus, with tokenization comes the benefit of public-key cryptography, which is an undisputed way to manage digital ownership. Blockchain is fuelling a new breed of crypto collateralized loans, where one can keep his/her cryptocurrencies as collateral and open a crypto credit line without much hassle, thereby having a crypto equity line of credit in place which much safer than the leveraged lending of traditional markets. Further, smart contracts can be used to automate a significant chunk of operations when disbursal conditions are met or when recovery needs to be done. This removes highly redundant work from the loan cycle, i.e., from loan origination to vetting, to underwriting, to funding, to recovery, making it very cheap.
