Fintech or financial technology is a broad term that encompasses technology used in the management and delivery of financial services. It covers technologies as diverse as financial service mobile apps, ATMs, and even, in the past, sending money by telegraph. 

At Manao Software we are experts in developing fintech apps for both mobile and desktop devices and have worked with many companies to create secure and effective fintech apps that are loved by our customers and end users alike. 

The History and Evolution of Fintech

While fintech services go as far back as the late 19th century, what we think of as fintech today first started to evolve in the 1980s as banking infrastructure became computerized. Then in the 1990s online banking was born. 

Since 1998 when PayPal launched, financial services have increasingly moved online, with many people only ever accessing their accounts via their phone or laptop, and in many cases, physical bank branches becoming a relic of a former age. 

This change has sped up recently with the advent of neobanks or “challenger banks”, like Revolut and N26, which challenge the traditional model of banking.  They are entirely online and generally offer a limited range of services compared with traditional banks. 

The fintech space is coming up with more innovations like Robinhood, which offers commission-free investing and trading through their mobile app, and Nova Credit which is disrupting the traditional credit scoring industry. 

So while Web 3.0 is still not entirely with us it has been coming over the horizon since the launch of Bitcoin, in 2009, and is becoming more and more relevant with every day that passes. 

Examples of Fintech

Here are a few fintech technology examples you might find in the wild today:

• Payment apps like Venmo, where users have a digital wallet from which they can send money to other users of the app. Or buy-now-pay-later apps like Anyday that offer installment payments to users. 
• Online banking apps are ubiquitous. Every bank has one and they have varying functionality, with some allowing you to open new accounts or apply for credit via the app, while others merely allow you to check your balance and carry out simple transactions. 
• Blockchain and cryptocurrency apps like Binance, allow users to buy and sell cryptocurrencies and manage their digital assets on the blockchain, securely.
• Budgeting apps can vary from simple apps for tracking spending to apps like Mint, which connect securely to many banks and credit cards to track finances automatically.
• Crowdfunding apps like Kickstarter, allow anyone to invest in or support startups. 

Impact of Web 3.0 on the Fintech Industry

Before we can discuss the impact of Web 3.0 on fintech, we should first define Web 3.0. This is tricky as it’s not a single technology, but rather the way in which the web is evolving. It involves a range of concepts and technological developments, including decentralised data, blockchain, artificial intelligence, internet of things (IoT) and machine learning, to enable a smarter, ubiquitous web. 

Many of these developments will have an impact on the fintech industry in a variety of ways and in order for a company to survive in this brave new world, it’s important to understand exactly what these changes involve. 

Blockchain Powering DeFi (Decentralised Finance) 

DeFi is probably the most obvious example of fintech evolution through Web 3.0, with central banks and mediators like Visa and SWIFT no longer being needed to power international transactions. With DeFi and the blockchain, consumers have control over their assets like never before. Money can be sent anywhere in the world without passing through central authorities or facing many of the regulations it currently does. 

The blockchain can also be used to give a secure proof of identity, which has advantages for many industries including fintech. 

IoT 

The IoT allows transactions to be carried out from anywhere – for example, a fridge, car or printer can now make purchases for the consumer, without the need for a laptop or smartphone. Combined with AI and machine learning these devices can even make purchasing decisions for the consumer.

AI and Machine Learning 

AI and machine learning are being used to create smart internet and computer systems that can learn and understand more complex concepts. Along with vast reams of data owned by many organizations, this can be used in many industries, including finance, to help make smarter business decisions. It can be used by fintech to segment our customers down to the individual level, so we can target them with the most relevant information and offers. 

Benefits of Web 3.0 for the Fintech Industry

With any technological advancement, especially one as seismic as Web 3.0, there come many benefits and challenges. Here are some of the opportunities for the fintech industry. 

Trustworthiness

Blockchain enables a very transparent chain of transactions with an extremely high level of trust. This is one of its major benefits. It also allows user identification (even anonymously) in a very secure fashion, as people can store and verify their identity using the blockchain. 

The decentralised nature of the blockchain also makes it much more stable, as there is no longer a single point of failure in financial systems, unlike with many more traditional financial service models. 

Accessibility

In theory, Web 3.0 provides a more egalitarian approach to the control of data and management of our finances, although at the moment this is still in the future. The idea is that anyone will be able to control their own finances, assets and identity using apps that make use of blockchain technology. However, at the moment there is still a technological and educational barrier to entry with many consumers nervous about these technologies, or lacking the devices needed to access them. 

Improved Customer Journey

With every technological innovation, one of the goals is to make the user experience easier and more straightforward for consumers. This is also true of Web 3.0, especially through the use of IoT, AI and machine learning. These can be used to make financial transactions a more seamless experience for users as AI can intelligently map customer journeys. 

This is being done by, for example, the Royal Bank of Canada which is using AI and machine learning to help clients manage their trades. 

Faster Transactions

With the blockchain, transactions can be pretty much instantaneous. By removing mediators and middlemen for international financial transactions everything can be carried out more quickly. And using AI and machine intelligence, along with the vast amounts of data and faster processing times, financial decisions around, for example, credit and insurance can be sped up and automated. 

Challenges of Web 3.0 for the Fintech Industry

As with any new technology, there are many challenges that come with Web 3.0.

Early Stages 

There are always teething problems in the early stages of a technological shift. While this time offers a lot of opportunities for risk takers there are always more risks early on. Much of the technology that is being used for DeFi is still in its infancy and subject to bugs and glitches. 

There is also the challenge of competing protocols and platforms – no one wants to bet on Blu-Ray or Betamax instead of DVD or VHS, and that is a risk for pioneers in this space. 

Difficult to Regulate

While some elements of the blockchain are being regulated to some extent – for example, the US is now taxing gains made on crypto investments, much of the appeal and many of the goals of blockchain and cryptocurrency are to avoid regulation and bureaucracy set up by central banks or other financial regulators. 

This is both an opportunity and a challenge for fintech companies, especially those that have evolved from more traditional financial institutions. However, for startups, this can be a great opportunity to develop novel ideas in this new financial services environment. 

Increased Cybercrimes

With more devices connected to the internet, there are more opportunities for hacking accounts. So security for all devices that can make transactions, including IoT household devices, needs to be carefully considered and managed. 

Device Barrier to Entry

At present not all devices have enough processing power to fully take advantage of Web 3.0 apps. However, this is likely to change in the near future as the protocols and infrastructure behind Web 3.0 become more solidified. 

Data Management

With the huge amounts of data being collected by fintech organisations, this is only set to grow in the future, with an increase of data channels (IoT), so having a solid data management strategy in place, and using machine learning and AI to manage and utilise all this data, smartly, is a must. 

Consumers are also savvier about their data and how it is used so fintech organisations will need to be open and transparent with their customers about the data they are storing and what they will do with it. Many consumers are accepting of data usage if they understand how it can benefit them.

Fintech Under Web 3.0: What the Future Holds?

Web 3.0 and DeFi are shift changes in the way data is owned and managed, and how financial institutions work. It’s vital for all fintech and financial service companies to prepare to embrace these changes and evolve. 

At Manao Software we have a thorough understanding of the fintech apps world and our team works hard to keep up to date with all the developments that Web 3.0 is bringing. To discuss your fintech app project and how Web 3.0 should play a part in it, contact us now.