Recently, the banking landscape has changed dramatically. The financial crisis of 2008 unleashed a revolution generating new players with a major basic technological component, seeking to take advantage of the poor services and high costs of traditional banks, the so-called FinTech.
Finance y Technology
FinTech represents the contraction of the words Finance and Technology, as well as the label gathering mainly young companies that use technology to provide new financial products and services. The idea behind most FinTechs is to simplify and automate every financial transaction or any kind of service.
The technological development, the improvement of networks designed to make quick payments all around the world and the looser regulation providing support for many of these new solutions created a perfect storm which has led to the ascent of the “FinTech” concept, described as “one of the deepest disruptions in history” due to its actual involvement in all services affecting the lives of individuals anywhere in the world.
Nowadays, FinTech companies are characterized by their focus on the final consumer, providing a modern financial service that uses a major technological component to provide value-added services. Most of their products are 100% digital and automatic, ranging from the management of banking investments, savings or financing and, of course, money transfers.
These FinTechs are playing a major role in the complete remodelling of the banking system, by turning the traditional pattern to 180 degrees. Technology is becoming increasingly popular and accessible (the high number of Smartphones all around the world), while consumers demand simple, comfortable and easy services. Therefore, more individuals are choosing FinTechs vs traditional banks for their finances.
A real financial revolution
In parallel with the disruptive transformation of the financial sector, the emergence of blockchain technology and its generalization in multiples services has generated a second movement.
In 2008, the emergence of Bitcoin and blockchain technology gave rise to an alternative to the FIAT currency, which helps to avoid government control over currencies through decentralization, very low transaction costs and involvement in the system itself. Cryptocurrencies are born, a moment that requires a real financial revolution.
With the launch of Ethereum in 2015 and its subsequent development (DeFi), the development of a radical decentralized financial system (DeFi) takes a step forward, which, as an innovation, allows a peer-to-peer financial relationship between individuals and institutions, online and without intermediaries. But although Bitcoin and blockchain technology have proven to be disruptive, they have not replaced the existing centralized financial system (CeFi), but rather have helped evolve and improve the traditional structure in the last 7 years.
As individuals, companies and institutions integrate this culture and technology into their services, they will witness the new world order which will result from the merger between Crypto/DeFi and the traditional economy.
Decentralized protocols and applications allow greater transparency and openness, reduce costs and entry barriers and will make it easier for anyone (banked or not) to access them everywhere, generating a greater transfer of power to consumers, which facilitates greater autonomy, control, transparency and different options in managing your finances.
In short, the new FinTech products along with the Crypto/ DEFI revolution, based on blockchain and other technologies, provide benefits and generate added value over existing financial systems without replacing them, which will allow an extraordinary sustained growth both in terms of billing (being already a market of over 130,000 million dollars nowadays) and number of users.
This requires a change of culture within the traditional financial sector which will allow to understand that the objective must seek to integrate the best of both worlds to improve the consumer experience without compromising on greater security and better management of the financial risks that traditional banks can provide.