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Traditional Finance: A System Under Strain

Traditional finance has been underperforming for a long time, but its flaws have often been overlooked. In the current economic climate, these issues are coming to light, revealing the shortcomings of the conventional financial system. Today, nearly 1.4 billion people remain unbanked, with around one-fourth of the global population excluded by an industry that thrives on inefficiency.

Exclusion by Design

Traditional financial institutions continue to exclude individuals who lack documentation, credit histories, or stable infrastructure. This model has remained unchanged for years, failing to increase financial inclusion. However, blockchain technology and neobanks may offer solutions to this pressing issue.

High Fees and Delayed Transactions

Beyond inclusivity, traditional financial systems are plagued by outdated processes. For instance, international money transfers via banks can take days to finalize and often come with high fees. Remittance charges can average up to 6.35%, a significant burden for those in developing nations.

Neobanks leveraging blockchain infrastructure are changing this landscape. These platforms eliminate the need for intermediaries, making transfers faster, seamless, and low-cost. Decentralized networks remove the friction imposed by traditional banks, creating a financial system that serves everyone.

Financial Inclusion: More Than Just Access

Financial inclusion has been a buzzword in the industry for years. Traditional banks complicate onboarding processes, making financial services inaccessible to many. The majority of the unbanked population resides in developing regions where financial institutions either don’t operate or impose insurmountable barriers to entry.

Neobanks are challenging this by adopting decentralized models and moving beyond paper-based identification. Technologies like behavior-based identification through blockchain can provide financial identities to those excluded by traditional banks, offering equal financial opportunities.

The Illusion of Ownership in Traditional Finance

When you deposit funds in a bank, you expect them to be safe and untouched. However, banks use these funds for lending and investments, operating under fractional reserve banking models. This system is vulnerable to collapse if too many withdrawal requests occur in a short period, as seen during the Covid-19 pandemic.

Neobanks offering non-custodial accounts provide a solution. Users retain full ownership and control over their assets, ensuring financial resilience, especially during economic uncertainty.

The Data Exploitation Problem

Traditional finance also has issues with data security. Centralized systems accumulate vast amounts of personal information, making them prime targets for cybercriminals. The finance sector accounted for 27% of all data breaches in 2023 alone, exposing individuals to identity theft and fraud.

Blockchain-based neobanks decentralize data, reducing vulnerability. Individuals retain control over their personal information, and the transparent, secure nature of blockchain makes data breaches less likely.

Addressing Volatility Concerns

One common concern about neobanks and blockchain is the volatility of cryptocurrencies. Stablecoins offer a solution, providing the stability of traditional currencies while maintaining the speed, transparency, and security of blockchain technology. They ensure stable and predictable financial transactions, avoiding the risks of volatile assets.

Stablecoins represent the future of finance, offering a clear path to financial inclusion without exposing users to high-risk cryptocurrency markets. These digital assets make financial services accessible, transparent, and reliable for everyone.

The Future of Finance: Decentralization

The cracks in traditional finance are becoming more evident. Banks have long controlled money and dictated participation in the financial system, leaving billions behind. This system is broken, and it’s time for a new approach.

Blockchain-powered neobanks offer a decentralized, inclusive, and transparent alternative. They represent the future of finance, allowing everyone, regardless of location or financial background, to participate.

Maksym Sakharov is the group CEO, co-founder, and board member of WeFi, an on-chain, non-custodial neobank. With over eight years of management experience in the IT industry, Maksym brings a diverse skill set encompassing strong leadership, operational excellence, and service delivery. He has served as the CEO and co-founder of Exflow, as well as the founder and CEO of Whitemark. His career spans various environments, from start-ups to established IT development firms, where he has successfully managed operational performance across the Asia Pacific region. His strategic approach to management focuses on optimizing processes and driving team performance, enabling organizations to thrive in competitive markets. Through his extensive experience, Maksym has developed a reputation for fostering collaboration and innovation, making him a valuable asset in any operational setting.

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