How the rise of Web3 opens the door to Fintech innovation with Xero, SafePal and more

We have the invention and development of technology to thank for some of humanity’s most important advances. The invention of the telephone in 1876, the airplane in 1903, the computer in 1937 and the internet in 1974 completely changed how we live our everyday lives. As technology advances, how can the likes of web3, metaverse, blockchain and DeFi change the future of fintech?

Throughout March Fintech Timeswe consider the topic of innovative technology and which inventions and developments can have the greatest impact on fintech.

While our first week of coverage immersed you in everything you need to know about the confusing world of the metaverse, we round out our second week of innovative technologies by looking at the broader picture of web3, and more specifically, how promising developments in this sector are paving the way for a new generation of fintech innovation.

Joining the conversation today are experts from the entire industry spectrum, including Gateway.fm, SafePal, Zero, New York University and Hadean.

Find new financing

So without further ado, how does the rise of web3 open the door for fintech innovation?

Launching our conversation is James Mountaingeneral manager of technology strategy and integration at the New Zealand headquarters of the accounting software company Xero.

Bergin starts by acknowledging the significant level of transformation that financial services has experienced over the past decade; cite embedded finance and open banking as two notable areas of this activity.

“This type of change has largely been driven by a combination of regulation and demand for financial inclusion and quick, easy access to financial products on platforms and tools businesses already use,” explains Bergin.

Adding to this observation, he agrees that the rise of fintech platforms has enabled customers to gather “rich and reliable” information about their health and cash flow.

The availability of such insight to smaller businesses is, for Bergin, “helping to remove some of the long-standing barriers that have affected businesses in accessing traditional lending.”

“Innovation means creating new things to change something established,” he continues. “The wave of inventions in web3 technology unlocks the further potential for innovation in changing the established way of raising funds – also known as decentralized finance (DeFi).”

“This is an emerging area where new sources of capital are made available without leveraging traditional centralized banking infrastructure,” adds Bergin.

Bergin advises fintechs to explore providing more educational resources to help businesses understand exactly how to use these technologies to raise and allocate capital, including the impact they can have on small businesses, so that fintechs can harness the transformative potential of the web3 .

A more open and decentralized financial system

Moving on from this, Mimi KeshaniThe COO and co-founder of Hadean, the deep-tech cloud computing company that drives the creator economy of the metaverse, recognizes the capacity to build DeFi apps as one of the main advantages of web3, namely because they enable the delivery of financial services without the need for intermediaries such as banks or other financial organizations.

As Keshani explains, “this has the potential to upgrade the current financial system and increase everyone’s access to and affordability of financial services.”

She also points to web3’s ability to enable fintech innovation through the use of smart contracts.

Keshani explains how smart contracts directly encode the details of an agreement made between a buyer and a seller into lines of code.

“These contracts are self-executing, enabling financial transactions to be automated and completed faster, more efficiently and with fewer errors,” she says.

Turning attention to digital assets, Keshani states that non-fungible tokens (NFTs), which represent ownership of distinctive digital goods such as artwork or virtual property, are one of the new forms of digital assets that web3 is helping to create; “potentially opening up entirely new markets and revenue streams,” she adds.

“Overall, the growth of web3 results in a more open and decentralized financial system, which promotes innovation in fintech and opens up new business opportunities for entrepreneurs,” concludes Keshani.

A blank canvas

“It’s an exciting web3 play for fintechs around value-added services, improving system security and reducing the risk of fraud,” says Cuautemoc Weberco-founder and CEO of Gateway.fm, the developer of web3 infrastructure and utility products.

Weber acknowledges how web3-driven innovations, similar to how web3 addresses a number of legacy web2 problems for end users, can deliver a “mass of efficiencies for fintechs across the industry spectrum.”

He highlights web3’s ability to help streamline cross-border payments by bypassing intermediaries and reducing transaction fees as an example of this.

“Experimentation has always been the core driver of fintech innovation,” Weber continues, “and the web3 landscape provides an open canvas for new innovations to crystallize.”

“Today, a new breed of developers is empowered to build new financial applications and test them on decentralized networks, greatly expanding the parameters of fintech innovation,” he adds.

Weber sees the presence of greater transparency and security as two of the main advantages of DeFi applications, enabling the creation of smart contracts that automate financial transactions.

However, he warns that web3-led innovations must not alienate older users. “It’s a fine balance between offering unique new value, without undermining the proposition that attracted users in the first place,” he explains.

Nevertheless, “it is no surprise that there is a conveyor belt of fintech industry players looking to expand their service scope and take advantage of the opportunities web3 presents,” concludes Weber.

The new face of the worldwide payment network

Here Veronica WongCEO and co-founder of cryptocurrency wallet SafePal, emphasizes the abundance of benefits web3 generates for the transactional capabilities of the latest fintech innovations.

Explaining this, she says that at its basic core, web3 offers payment and transfer solutions that are “much more transparent and immutable with fewer geographic restrictions.”

“It can cost less than a dollar to transfer money abroad using the right blockchain networks with much faster processing times,” Wong continues.

In terms of value transfer and monetization, the advent of tokenization of physical assets, such as gold and real estate, is, as Wong sees it, allowing these two elements to become more seamless.

In this way, “public blockchains can serve as a ledger of records to reduce the need for intermediaries and paperwork,” she adds.

“There have also been experiments in bringing government bonds onto blockchains, which shows the potential for banks to offer investment products globally to users,” continues Wong, which she describes as “a boon for the unbanked.”

As the fintech industry becomes more familiar with web3 infrastructure, such as those supported by SafePal, Wong agrees that “these value propositions will become more seamless, secure and reliable for use at a larger scale.”

Fintech meets web3 meets fintech

That concludes our discussion of how the rise of web3 is facilitating a new level of fintech innovation Jarrod Barnesa clinical assistant professor of sports management at New York University’s School of Professional Studies.

“One of the simplest applications for web3 is stablecoins, which provide convenient and secure transactions without the need for intermediaries,” Barnes begins.

Despite many feeling more comfortable using traditional banking systems, stablecoins are gaining traction due to “their value proposition of making financial transactions faster and more efficient, with currently ~$135 billion of stablecoins in circulation,” he explains.

However, Barnes admits that the use of web3 technology is still in its early stages.

“The number of people participating in web3 is relatively small,” he comments. “There are about 30 million monthly active Metamask wallets, a good proxy for self-storage and interaction with applications beyond just investing, and many of the use cases are still in the development stage.”

With this, Barnes explains that web3 projects aimed at integrating the next billion users, such as games and social products, “often feel rough and early, with a focus on monetization rather than user experience.”

He concludes that as the industry matures and develops better infrastructure, it opens the door for fintech innovation to focus on delivering a better user experience while retaining the benefits of the technology.