As a seasoned IT professional with over eight years of management experience under my belt, I have witnessed firsthand the shortcomings of traditional finance. The exclusion, high fees, and delayed transactions have always felt like a thorn in the side of progress. But now, as we navigate through these challenging economic times, the cracks in TradFi are becoming impossible to ignore.
For a considerable period, conventional finance has been exhibiting weaknesses that were often disregarded. However, with the recent economic hardships, these flaws have become more apparent, making it impossible to ignore their shortcomings any longer. In today’s world, approximately 1.4 billion individuals lack access to banking services. This industry, which is built on the principles of exclusion and inefficiency, leaves a quarter of the global population behind.
In essence, conventional banks with their outdated systems tend to marginalize individuals who don’t possess necessary documents, credit records, or reliable infrastructure. This system unfairly targets a specific group and hasn’t shown significant progress towards inclusion over time. However, the blockchain technology and modern neobanks could potentially offer solutions for financial inclusivity in today’s digital economy.
High fees and delayed transactions
Beyond focusing solely on inclusivity, conventional financial systems are burdened with outdated procedures that struggle to keep pace with today’s swift digital world. For instance, international money transfers remain a lengthy process for many banks, taking several days to complete and often tacking on hefty fees. These transfer fees can escalate dramatically, reaching an average of 6.35%—a substantial amount given the worth of currencies in developing countries.
New banking systems constructed on blockchain technology are revolutionizing finance as we know it. These platforms minimize the role of intermediaries, resulting in swift, smooth, cost-effective, and virtually instantaneous transfers. By utilizing decentralized networks, they eradicate the obstacles imposed by conventional banks, thus creating a financial ecosystem that caters to all – not just the select few.
Financial inclusion is more than access
The issue of financial inclusion is not new—it’s been a buzzword in the industry for years. Banks have been constantly scrutinized for overcomplicating onboarding processes and making key financial services inaccessible to socially struggling individuals. The majority of the unbanked population in the world lives in developing regions where financial institutions either don’t operate or have imposed insurmountable barriers to entry. The focus on documentation and credit history has shut out large populations, creating an unequal and unjust global financial system.
New-age digital banks are revolutionizing the sector by progressing beyond traditional identification methods based on paperwork, instead opting for decentralized models. Technological advancements such as blockchain-backed identification systems – which we utilize at WeFi – can broaden the horizons of banking to those who have been previously excluded. These cutting-edge platforms can offer financial identities and equal financial opportunities to individuals that traditional banks may have overlooked.
The illusion of ownership in traditional finance
When you place money in a bank, there’s a widespread belief it’s secure. You assume your money stays untouched and protected from financial problems within your account. However, this sense of security can be misleading as traditional banks have the ability to utilize your funds for loans, investments, and other purposes. Most banks work based on the fractional reserve system, which is quite fragile. If there are numerous withdrawal requests in a short timeframe, these banks could potentially fail. Incidents like this have occurred during times of crisis such as the Covid-19 pandemic. Therefore, it’s an illusion to think you maintain complete control over the money in your bank account.
Non-custodial neobanks provide a valuable approach to managing finances, as they allow users to maintain complete ownership and control of their assets. This means that neither the bank nor any external party can claim rehypothecation rights over these assets. In uncertain economic times, this level of self-governance is essential for financial stability.
The data exploitation problem
A significant weakness in conventional finance lies in its handling of data. Decentralized platforms amass enormous amounts of personal customer information, which can attract cybercriminals. In fact, the finance sector was responsible for 27% of all data breaches in 2023, making it a preferred target. This centralization leaves individuals exposed to identity theft, fraud, and other types of cybercrime, with financial institutions having minimal responsibility or accountability in these instances.
In a blockchain-centered neobank setup, the risk of data compromise is minimized as data is dispersed across multiple nodes instead of being stored centrally. This way, users maintain ownership of their personal details, reducing the probability of data leaks since the blockchain’s transparency and robust security make breaches less likely.
What about volatility?
As a researcher delving into the realm of neobanks and blockchains, I often encounter a common perception: ‘Cryptocurrencies are notoriously volatile.’ The erratic price swings of these digital assets can be a significant concern for the general public.
The future of finance will inevitably revolve around stablecoins, as they offer a clear path to financial inclusion without exposing users to the high-risk nature of the broader cryptocurrency market. These digital assets make financial services accessible, transparent, and reliable for anyone, anywhere.
TradFi is failing the world, and decentralization is the solution
The flaws in conventional banking are becoming more pronounced. For far too long, banks have wielded power over money and determined who gets access to the financial world. Consequently, countless individuals have been excluded, either due to a lack of necessary documents, remote locations, or exorbitant fees. This outdated system is beyond repair, and it’s high time we embraced change.
Blockchain-fueled neobanks are the optimal solution to dismantling the barriers that have excluded many from basic financial opportunities. By offering a decentralized, inclusive, and transparent alternative, these platforms represent the future of finance, one where everyone, regardless of location or financial background, can participate.
As a seasoned professional with over eight years of management experience in the IT sector, I find myself currently serving as the group CEO, co-founder, and board member of WeFi, an innovative on-chain, non-custodial neobank. My diverse skill set, which includes strong leadership abilities, operational proficiency, and a knack for service delivery, has been honed through various roles, from spearheading start-ups to managing operations in established IT development firms across the Asia Pacific region. In my previous positions as CEO and co-founder of Exflow, and founder and CEO of Whitemark, I have consistently demonstrated my ability to optimize processes, drive team performance, and foster a collaborative, innovative environment – traits that have earned me recognition in competitive markets.
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2024-10-27 14:08