The world wide web is on the verge of a technological revolution. Powered by machine learning and blockchain technology, this new version of the world wide web (known as Web.3) will support a faster, more intelligent, and better-connected internet.
It will drive change in major global industries, including banking, financial services, and fintech law and regulation. This is where we're likely to see some of the most significant and impactful adoptions.
From financial services to capital markets and asset management to consumer banking and FinTech regulation, we're about to witness an exciting period of innovation that blends finance and technology. It promises greater freedoms for individuals and countless opportunities for financial service companies and fintech start-ups prepared to embrace the future of finance.
What is web 3.0?
Web 3.0 is the internet of the future, being built today. This latest iteration of the world wide web will be characterised by artificial intelligence (AI) tools and software, a mesh of interconnected smart devices, and open-source blockchain networks that are trustless and permissionless.
Web 3.0 promises to be faster and more secure than web 1.0 and today's web 2.0. And, perhaps most importantly, it has the potential to make every user a truly sovereign individual.
Blockchain technology will allow people to interact, trade, and create new social media platforms without an intermediary. The decentralised networks that will underpin Web 3.0 require no overseeing governing body or trusted third-party authority. Users will regain the power to control who (if anyone) profits from their time, information, or personal data.
In many ways, Web 3.0 is the internet we were promised:
"The original idea of the web was that it should be a collaborative space where you can communicate through sharing information,"
said Tim Berners-Lees, credited with 'inventing' the internet.
"The web is for everybody, and so if the web is for everyone, the contract has got to be for everyone."
A brief history of FinTech
Financial technology (FinTech) and FinTech law refer to the new technologies that improve and automate banking systems and the financial services industry.
When the technology first emerged, it focused on back-end systems and processes of established financial institutions. In recent years, there's been a significant shift by fintech start-ups towards more consumer-oriented products and services, as well as a rapidly increasing adoption of what experts call the ABCD of FinTech (artificial intelligence, Blockchain, Cloud computing, and big data.)
Fintech also refers to developing cryptocurrencies and emerging blockchain-based financial technologies, like Bitcoin and Decentralized Finance (De-Fi.)
What is Decentralised Finance?
Decentralised finance - or De-Fi - is a collective term for a range of peer-to-peer financial services that operate on public, open-source blockchains.
It's probably the closest thing we have to a vision of the permissionless and automated Web 3.0.
De-Fi products and platforms offer financial instruments and ways of trading without 'trusted' third-party intermediaries or financial service companies, such as a brokerage, exchange, or bank. With De-Fi, users can borrow, earn interest, lend, and trade derivatives without filling out paperwork or receiving permission from a bank. It's often described as banking or trading without the actual banks or trading houses.
The benefits of Web 3.0 and De-Fi
Accessibility
"Don't Trust, Verify."
The Bitcoin maxim refers to the open-source nature of blockchain technology. Public blockchains allow anyone to view and participate in the network, and anyone can read, write, and, crucially, audit the ongoing activities on the network. Open source is central to the self-governed, trustless, and decentralised nature of cryptocurrency, De-Fi, and Web 3.0.
Trust
Crypto holders can take full custody of their digital assets on offline cold storage devices. People and institutions can completely own their wealth and assets for the first time in modern, digitised banking. They're not forced into trusting an intermediary or taking on any third-party risk to keep their money 'safe.'
Speed
Cryptocurrency exchanges and fintech companies like Nexo.io allow users to borrow money using their Bitcoin and other digital assets as collateral. There's no paperwork, credit checks, and zero risk on the lender's side. It's also fast. It's very fast. Nexo account holders can have crypto-backed loans approved in less than 60 seconds. That's quicker than the average call waiting time at a high-street bank's customer service centre.
Customer experience
Millions of people worldwide can now send money in any currency, to any country, for free, at any time of the day or night. And these remittance payments settle in real-time. All they need is the Strike mobile payment app.
Strike has serious potential to become a major disrupter of the global financial services industry. Instead of traditional payment rails, Strike uses Bitcoin's base-layer protocol to offer users secure (and instant) border payments with zero fees. This is what many Bitcoin idealists have been dreaming about for years: money without borders.
The opportunities in Web 3.0
Consumer banking
Web 3.0 applications are many great things, but being user-friendly is rarely one of them. Click-and-buy crypto platforms like Coinbase are the exception rather than the rule, especially for people interested in more complex applications, like staking or investing in newer cryptocurrencies with high-growth potential.
Finding ways to onboard new users is challenging for fintech companies, but it's also an enormous opportunity. Around 1 billion people currently use or hold cryptocurrencies; that figure is expected to triple by 2030.
Financial services
Financial services firms already use AI for trading, fraud detection, and portfolio optimisation. But it also has several retail applications that can help firms provide a better and more personalised customer experience. Advanced AI can analyse data to improve customer acquisition and retention, identify cross-selling opportunities, and recommend tailored services and products to individual customers.
Asset management
To manage new digital assets like Bitcoin, asset management firms will need to create or adopt a technological infrastructure to store and exchange their customer assets in a trustless and secure manner.
How they do this depends on what their customers want. And that could redefine the relationship between the user and asset manager.
Seasoned crypto holders may reject the traditional custodial business models, where assets are held on their behalf. Instead, they could (and in many cases do already) demand an open and fully transparent asset management service where their digital assets can move (and be accessed) at digital speeds.
Capital markets
The blockchain has already unlocked new potential in capital markets and the global economy. In April 2021, Goldman Sachs issued a 2-year, Є100million digital bond for the European Investment Bank. "The transaction represents a sea-change in the capital markets," read a Goldman Sach press release. "[It] opens a new window of innovation and efficiency to meet users' bespoke and evolving needs."
Web 3.0 is happening, and the global financial services industry will change forever. It's a once-in-a-generation opportunity for fintech firms with the knowledge and expertise to leverage a first-mover advantage.
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