The world of fintech is currently experiencing tremendous growth. The fintech sector, which currently holds a 2% share of the $12.5 trillion in global financial services revenue, is estimated to grow up to 7% and projected to become a $1.5 trillion industry by 2030. Explosive expansion like that is bound to bring about big changes to the industry, and today, we will try to make sense of what the future holds. Looking at the growth of certain subsectors of the industry, we will explore some of the newest fintech projects and trends that are expected to be in high demand in the near future.
Decentralization Is the Name of the Game
In recent years, there has been a notable shift in the mindset of internet users as they become increasingly data-conscious and concerned about the practices of tech giants.
These changes in how users relate to the data they generate don’t come without some conflicts with the status quo. The realization of how much personal data is being collected, stored, and monetized without the user's explicit consent has fueled a growing demand for alternative solutions. Companies providing foundational infrastructure to accelerate web3 adoption, like Alchemy and Mysten labs, are among the fastest growing in the fintech industry, proving that the market forces are betting on web3 apps for the future. Markets continue to be great instruments at funneling resources to fulfilling an unmet demand, and rising popularity of Web3 signifies a strong desire for a more user-centric and privacy-focused internet, where individuals have the autonomy to determine how their data is used and shared. It is crucial that the infrastructure of future internet and social media networks does not fall under the sole ownership of dominant entities like Meta, which currently controls Facebook, Instagram, and WhatsApp. The existence of such powerful incumbents limits user autonomy and stifles choice, not only within the realm of web3 and the internet but across industries as a whole.
“The year 2023 is expected to see the continued development of Web3 infrastructure with continued attention to investor education and awareness.” According to Leon Foong, Head of APAC at Binance, "To build a robust Web3 infrastructure, security is very important, and Binance plans to continue with initiatives such as Global Law Enforcement Training Program, disclosing Binance's hot and cold wallet addresses through Proof of Reserves, and establishing the Industry Recovery Initiative (IRI) to protect consumers and rebuild the industry."
Markets chasing demand bring big players into the fold. Big companies are investing in blockchain technology and developing platforms and applications that will be used in the web3 ecosystem. They don’t want to be left behind.
Big Players Entering The Market
Established financial institutions like JP Morgan are now dipping their toes into the realm of blockchain products. To me, it signifies the growing appeal of cryptocurrencies and decentralized technologies among traditional institutional players. These are not decisions that are made on a whim. With their extensive resources and expertise, these institutions recognize the transformative potential of blockchain and its ability to revolutionize the financial landscape, even though a couple of years ago, they were skeptical at best. By embracing blockchain, they aim to take part in constructing a future landscape and capitalize on new technologies and opportunities, starting with payments.
Blockchain-based payment systems hold immense relevance for the future of finance and transactions. Payments has been the best-funded fintech sub sector for the third year in a row. But how the deepening recession will affect the industry going forward is still up in the air. As traditional payment systems face challenges like high fees, slow processing times, and limited accessibility, blockchain technology offers a transformative alternative. Following the likes of JP Morgan, IBM are launching their own blockchain-based payment networks, forcing competitors to follow.
Apart from entering the market with their own offerings, there’s a growing trend of big companies accelerating their progress by joining forces with startups that have shown big advances in new technologies. These collaborations often tend to be imbalanced; however, with the larger corporations exerting control over the direction of progress and holding controlling stakes in the emerging developments, primarily for their own convenience.
Wherever there is complacency, there’s ample opportunity for disruption, and a burgeoning subsector of the industry is positioned to do just that.
Disrupting The Status Quo
DeFi is a rapidly growing sector in the fintech space, offering new financial services that are powerful and stand opposite of traditional financial institutions. It provides a solid foundation for innovative financial products and services that eliminate intermediaries and centralized control. The global decentralized finance market size was valued at USD 13.61 billion in 2022 and is expected to expand at a staggering compound annual growth rate of 46.0% from 2023 to 2030.
47.6% (190 out of 400 surveyed users) stated that they plan to start using DeFi in the near future. 53% (211 users) mentioned their interest in receiving education on DeFi.
Iuliia Goncharova, Head of Growth at Choise.com states: “At choise.com, we are witnessing a growing interest in DeFi tools. Through recent surveys, we have found that 53% of the surveyed users expressed interest in educational events related to DeFi. Additionally, 48% indicated their intention to use DeFi tools in the near future. DeFi strategies involve higher levels of risk, but for audiences with limited financial resources, it presents an excellent opportunity to achieve significantly higher returns. However, this requires a deep understanding and immersion in decentralized finance. We have not only developed a platform that simplifies access to DeFi but also initiated a series of educational events for our users.”
Built on blockchain technology, DeFi platforms offer a range of financial services, including lending, borrowing, trading, and investment, all without the need for intermediaries. According to Ilia Maksimenka, CEO and Founder of PlasmaPay: “Decentralized financial instruments make cryptocurrency and the blockchain sector capable of accomplishing what was once only possible in traditional money markets. Thanks to the likes of Compound and Balancer, services such as borrowing and lending can now take place in a wholly decentralized manner, without ever involving banking institutions.” By eliminating centralized control, DeFi platforms provide increased financial inclusivity, transparency, and accessibility to individuals worldwide.
DeFi also enables the creation and trading of digital assets, allowing for the development of innovative financial instruments and investment opportunities. Companies like Choise.com are democratizing finance already, by empowering individuals and businesses with greater financial sovereignty, offering secure B2B crypto interest accounts & loans. For more information, email to cryptobanking@choise.com.
With this unprecedented market growth comes a growing criticism of the environmental implications within the industry. In an increasingly environmentally conscious world it’s getting harder for the public to buy into the idea of democratizing finance, when that same industry becomes, year over year, a larger contributor of climate change, the effects of which we are starting to acutely feel today.
Setting The Sights To Sustainable Future
The environmental impact of blockchain technology has become a growing concern in recent years. The energy-intensive process of validating and securing blockchain transactions, especially in popular cryptocurrencies like Bitcoin, has raised questions about its carbon footprint.
However, the blockchain community is actively working on sustainable solutions to address this issue. One approach is the development of eco-friendly consensus algorithms, such as Proof-of-Stake (PoS), which consume significantly less energy compared to the traditional Proof-of-Work (PoW) algorithm. In 2022, Ethereum switched from the Proof of Work to the Proof of Stake consensus algorithm, cutting their electricity consumption by 99%. There’s also companies like 5ire, building a sustainable blockchain, aiming to combat criticism that the industry is too energy intensive. This London-headquartered startup was launched in November 2021 and has already secured a $1.5bn valuation, showing there’s a wider industry demand for sustainability.
Another promising solution is the use of renewable energy sources to power blockchain networks, reducing reliance on fossil fuels. Crypto Climate Accord (CCA) aims to enable all blockchains to be powered by 100% renewable energy by 2025. Companies can partner with organizations like the Energy Web Foundation and the Renewable Energy Business Alliance to decarbonize blockchains. Some blockchain technologies, like the XRP Ledger, are designed to be carbon-neutral and energy-efficient and will probably see wider adoption in the future.
Climate change is rapidly wreaking havoc, demanding urgent action. What we need are tangible goals, collaborative efforts, innovative solutions, and shared responsibility, just like the Paris Accords exemplified. The reassuring part of it is that we can find practical, market-based solutions that generate value and foster growth for everyone.
By collaborating with climate activists and clean tech pioneers, the crypto community has the potential to establish blockchain as the ultimate sustainable trajectory, paving the way for a more efficient and environmentally friendly financial future.
