Smart Contract-Based Blockchain Framework for Securing FinTech Loan Processing Systems

Abstract

The rapid digitalization of financial services has made FinTech loan processing highly susceptible to security threats and inefficiencies. An innovative contract-based blockchain framework is proposed to ensure secure, transparent, and automated loan processing. Current FinTech loan systems often rely on centralized architectures, leading to risks such as data breaches, fraud, lack of transparency, and delayed loan disbursement due to manual verifications. These issues hinder trust and operational efficiency in digital lending platforms. To overcome these limitations, the proposed framework employs the Blockchain-Based Layered Framework (B-BLF), which provides a structured approach to develop and evaluate technological artifacts. Through iterative problem identification, design, and evaluation phases, B-BLF ensures the solution is both innovative and effective. The smart contract-based solution uses the Ethereum blockchain to automate loan approval, disbursement, and repayment processes. It validates borrower information, executes contractual terms autonomously, and stores transactions immutably, thereby reducing human intervention and operational risks. The findings reveal that the proposed method enhances data integrity of 97.2%, speeds up loan approval of 95.6% and disbursement, reduces fraud, and improves user trust over 98.2% in FinTech services. The framework proves to be a scalable and secure solution for modernizing financial loan systems.