Humanity owes a great deal to banking. With roots in ancient Mesopotamia, the banking industry has been a critical component of the global economy for thousands of years. By providing billions of people and organizations with a way to store, borrow, and transact with their money, banks were long seen as symbols of progress and trust. Today, however, traditional banks are struggling to avoid becoming a relic of the past.
The rise of digital technology fundamentally changed the way we see and use money. Convenience, customized experiences, ease of use, accessibility, autonomy, lower costs, and connectivity are only some of the things we have come to expect from financial services. Not only has fintech brought all of these benefits straight to our favorite devices but has made it at a speed that traditional banks can’t match, even when they want to.
Attempts by traditional banks to catch up have proven that these organizations are poorly equipped to deal with the rapidly changing needs of their customers. If these interests threaten the monopoly and profits of traditional banks, banks might even choose to go against them. Examples of such a practice range from engaging in fraudulent sales practices to actively lobbying against fintech, which is now used by almost 90% of Americans.
With the Biden administration getting ready to introduce tougher regulations, fintech could see its rapid growth slowed down. Paradoxically, banks have benefitted from high levels of regulation so far, as this has acted as a barrier preventing fintech players to join the market due to the costs, time required, and difficulty of the process. As this means that fintech is unable to access services such as Federal Reserve accounts, traditional banks have been able to keep their grip over certain financial systems.
So far, banks have been able to hold their ground despite more and more people turning to fintech for their financial needs but this is likely to change in the near future. According to a McKinsey & Company report, the number of fintech unicorns by September 2022 was 274, up from 25 in 2017. While fintech growth has slowed down over the past year as a result of the economic turndown, overall fintech adoption increased by 38% over the past two years.
Fintech’s biggest advantage over traditional banks has proven to be its willingness to explore new technologies and models to provide added value to its customers. By beating traditional banks at capitalizing on trends like embedded finance, artificial intelligence (AI), IoT, and “buy now, pay later”, fintech certainly continues to be the face of financial innovation.
As the crypto industry gets closer to regulatory clarity, fintech’s role in the global economy is likely to become more evident. Fintech’s use of cryptocurrency and blockchain technology has allowed the industry to reach a marginalized group that can’t or won’t make use of legacy financial systems. The adoption of NFTs, DeFi, and web3 represents a shift toward a customer-centric financial system, which will be to the benefit of everyone.
Orbs’ Vice President Of Business Development Ran Hammer and Momentum Capital’s Advisor Thomas White sat with The Milk Road’s Writer Katie Canales as part of the “Enhanced Execution and the Future of Banking” panel. Touching on topics like Bitcoin’s role as a safe haven and the future of web3, the panel offered important insights on crypto’s role in the banking revolution to those attending this year’s edition of Grit Daily House at Consensus. To learn more, make sure to watch the video on Grit Daily’s official YouTube channel or below.