What is dematerialization?
Dematerialization (also known as demat) is the terminology used to describe the change from tangible certificates to an electronic form of book keeping. This move from physical stock certificates to electronic has already started to take place.
Where have you heard about dematerialization?
Demat accounts in India are completely paperless, electronic accounts where the sale of a security is automatically made immediately after the confirmation and completion of a transaction. India first began this demat system in 1996 and it soon began to eliminate all of the risk associated with paper certificates.
What you need to know about dematerialization...
We live in advanced technological times and the need for securities to work with paper certificates is no longer wholly necessary as most things can be transferred and registered electronically. These advances are in opposition to traditional book entry systems, which date back to civilisations as far back as Assyria in 2000 BC, as well as paper certificates – both methods having significant risks. Users have stated that dematerialization has made the process, sale and transfer of shares significantly easier. However, there is an increased risk with cyber security.