…if not to survive?
In the past decade, the fintech industry has played a big part in transforming the world of finance. Although technology helped improve the distribution of financial services, the majority of other issues remain unresolved. When it comes to sending money overseas, the banking sector is desperately behind the times. Besides, a considerable amount of people on the planet remain unbanked.
Innovations in the financial industry take longer than in any other sector as the conservative over-hundred-year old institutions are not too keen on change. And even when they do, the price of remodelling is way too high.
Financial services, in turn, are becoming a number-one focus for all kinds of companies, and fintech is destined to benefit various businesses. And cryptocurrency can help speed up the reformation process.
The Obstacles Along the Fintech Way
Providing fast, cheap, and efficient services is fintech’s primary objective. Currently, the industry is leaning towards two main directions: disrupting the banking sector and using its systems as a foundation or creating layer 2 solutions. However, all the fintech startups, sooner or later, run into one major issue. The infrastructure, a crucial part of any financial system, is severely underdeveloped.
The disbalance in tech solutions is on the broader side. Think about it: today, you can use all kinds of messengers to send an instant, encrypted message to another side of the world, and yet sending a money transfer to your family abroad often turns into a burden. So no matter how advanced the underlying tech gets, the necessity to integrate SEPA and Swift transfers into your final product remains unavoidable. And that is an unfortunate inconvenience.
There are just too many middlemen and unnecessary actions on the way. Banks have to communicate with each other and wait until the other party finishes the process it needs to perform before they can go any further. As a result, the chain of intermediaries becomes endless, which significantly slows down transaction approval. Distributed ledger technology, in turn, seems to be the missing piece of the fintech puzzle.
A decentralized cryptocurrency-powered environment is a perfect playground for executing all kinds of financial transactions. Moreover, it helps minimize third-party risks, enables key processes’ transparency, and improves security level.
Crypto to the Rescue?
Numerous fintech startups are using cryptocurrency potential to improve the process of international and local remittances, and Mercuryo is a vivid example of how it can be put into practice. Determined to make cross-border money transfers immediate and universally accessible, Mercuryo enables a straightforward service that allows sending funds instantly. The whole process involves no intermediaries and narrows down to only two actions: fiat-to-crypto exchange when sending and crypto-to-fiat when receiving.
However, the banking sector doesn’t have to be left out entirely. Fintech and crypto-powered products can be integrated into banking systems, bringing their services up to date. Mercuryo’s fintech crypto SAAS solution, for instance, works just like that. By leveraging the product, banks can enable customers to buy cryptocurrency using their fiat bank accounts. At the same time, the bank doesn’t need to hold any crypto as customers receive their coins via a third-party wallet. Mercuryo ensures custody of cryptocurrency and confirms the balance info with the bank.
DeFi vs Fintech: Who Did It Better
However, editing someone’s work is always trickier than creating something new. DeFi is already transforming lending, borrowing, automated trading, margin trading, insurance, and many other financial services. Since it is easier to start from scratch in the decentralized space rather than deal with a confusing regulation model, the speed of introducing new crypto-driven solutions is impressive. While you still have to deal with regulations later, the
DeFi space boasts two key advantages: standardization and compatibility. The majority of tokens are ERC20 tokens supported by a wide range of wallets, exchanges, and dapps. Besides, if one doesn’t use this standard, they can always check the source code and adapt the interface accordingly. Ethereum is currently an ideal playing ground for decentralized projects from money markets to crypto art and NFTs.
Regardless of dazzling possibilities, DeFi is not flawless, and when it comes to usability, it lags far behind. Combining fintech and decentralized finance can help resolve some significant issues. For example, cryptocurrency on- and off-ramps can still be a painful inconvenience for average crypto-unsavvy users. If buying crypto is more or less accessible, withdrawals are not always that straightforward.
Another widespread crypto-related problem is, surprisingly, the decentralization itself. Running a DEX can be a liberating business before one of the transactions doesn’t come through. However, decentralized services lack customer support, and that doesn’t contribute to a positive customer experience. The same goes for trust. In general, the audience is still not ready to use a product, let alone a financial service, that doesn’t have a solid, trustworthy foundation underneath it. When something goes wrong, who’s going to be responsible for money losses? Would they get compensated? At the end of the day, people would choose a platform that can guarantee a certain level of safety rather than an ultra-modern, decentralized, yet disputable service.
The Bottom Line
The financial industry is about to go through some fundamental changes. As soon as more blockchain, crypto, and fintech projects start collaborating, the transformation will accelerate.
Safe data storage, fast and cheap cross-border transactions, advanced digital identity verification, and universally accessible banking services will soon become a new reality. Smart contracts alone have the potential to improve a wide range of business processes and benefit any industry.
While decentralization is an attractive concept, it might be a while until we learn how to approach it from a legal perspective. Until authorities come up with a comprehensive regulatory framework, fintech and crypto can design alternative solutions that can blend into the current finance scene smoothly.