FinTech (financial technology) has dramatically disrupted the finance industry by democratizing services like savings, investing, and bank lending. It has been confronted in recent years with the emergence of DeFi (decentralized finance) which has facilitated access to financial services by eliminating intermediaries. While many are predicting that DeFi will totally eclipse FinTech, it seems they have a vested interest in cooperating to thrive in Web 3.0. Explanations.
Strengths and Weaknesses of DeFi and FinTech
First of all, it is important to point out that DeFi and FinTech each have qualities that are beneficial to the consumer. In particular, they make it possible to solve problems that have long weighed on traditional financial markets by developing applications with very convenient user interfaces. FinTech has made it easier to grant loans and to send money to anyone in the world with reduced fees and in complete safety. However, its centralization has favored the establishment of a system of censorship that opposes financial inclusion.
For its part, DeFi enables the disintermediation and digitization of financial services without the supervision of a central authority, thus reducing the risk of fraudulent activity. DeFi apps make it possible to take out secured loans worth millions of dollars in seconds and exchange or send crypto assets anytime. However, the lack of regulation of DeFi, coupled with that of the crypto assets it uses, acts as a brake on its widespread adoption. Since then, some finance specialists have considered unifying DeFi and FinTech.
A cooperation with multiple benefits
UK-based Baanx is a FinTech company that integrates DeFi solutions to formulate a smarter, more efficient and trustless financial order. It has formed partnerships with leaders in the cryptosphere such as Ledger and Tezos to bring all the qualities of FinTech to DeFi, including a solid framework and regulatory approval . The partnership of DeFi leaders with well-established companies like Baanx seems like a sign of where the financial industry is headed.
Adoption of DeFi will only increase as trust issues in the traditional financial space persist with yield potential no longer evolving. With FinTech companies like Baanx embracing DeFi, it looks like the two worlds have a good chance of coexisting. Although the DeFi industry is brand new compared to the history and establishment of FinTech, the way forward should be one of cooperation rather than outright exclusion .
DeFi will enable the establishment of an alternative, completely decentralized, censorship-free, low-cost and fully automated financial system. When brought together, FinTech and DeFi can accelerate the adoption of Web 3.0 applications and forever transform access to financial services through more efficient end-user products.
Source: NewsBTC
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