How will the evolution of the web have an effect on Financial Services? This is a question that puts many financial institutions in peril but is it really something that will put banks out of business?
What is Web 3.0?
Web 3.0 is a new evolution phase that is coming into reality. The web as we know, is evolving into something more secure with more opportunities and various features. A lot of people don’t understand Web 3.0 and are scared of it. This will be a massive change on how we see the internet and how we will use it. It is going to be a decentralized platform and it will be individualized wherein you can customize your internet browsing experience.
The Royal Bank of Canada is utilizing millions of data points to train its own AI, resulting in fewer client calls and faster application delivery. Meanwhile, BNY Mellon, the world’s largest cross-border payments service provider, improved its fraud prediction accuracy by 20%. By researching real-time market data within nanoseconds, AI and high-performance computing (HPC) are combining to provide better and faster trading intelligence.
What does this mean for Financial Services?
Web 3.0 is transforming the finance sphere slowly into a decentralized place. Basically, you don’t need a financial institution governing your transaction or authorizing them. The transaction will only be initiated by you and reaches the receiver, in a matter of moments, without any middlemen. Using cryptocurrency, you can make transactions over blockchain that eliminates that bank server from between. Cryptos are digital assets that let users transact directly without a payment service provider in the intermediary, which means that they enable new forms of capital. Although Bitcoin remains comparatively low now, it still may provide effective money governance by preserving and protecting the data or memory of what our money represents. Then there is the unparalleled manipulation of fiat money. We can observe how central banks have significantly extended their balance sheets since the GFC and the ongoing pandemic COVID-19.
DeFi
DeFi is short for decentralized finance where there are no middlemen between you and the receiver. The transaction will be on the blockchain where the transaction time is reduced from time of hours/days, to moments that you can count on your hands. With DeFi, you can perform all transactions and services that are offered by traditional banks, without the bank in between. Now, you might wait for your transaction to be passed through because your bank should allow it and then it has to pass through the bank’s server.
DeFi uses cryptocurrency as the main currency because they are programmed using blockchain technology. There is a huge difference between CeFi and DeFi.
Effect on Financial Services
Undoubtedly, Web 3.0 has opened its doors for infinite opportunities and many FinTechs are utilizing them while traditional institutions are being left behind. These organizations are investing in their technology and its improvement in this rapidly changing market. These FinTechs’ major part of investment is into AI which are being programmed to understand the different problems faced by people and able to give out the solutions in a matter of seconds. This dependance on AIs is being constantly improved which are learning from their own errors and giving better and more efficient solutions. A survey by NVIDIA , according to it, nearly 83% of finance service professionals say that AI is essential for the companies’ success. It is also said that AI can improve company growth by 20%.
Conclusion
Web 3.0 is bringing so many opportunities while improving the present technology and organizations that are utilizing it will not be taking rest anytime soon. This technology is just going to become better and better. Every single day that we see this technology step up just shows that we are not done with technology, it can be better and more efficient and these companies are proving that to use everyday. Web 3.0 is showing more freedom of speech and thoughts than the present restricted web 2.0, decentralization is going to put back the control back in the hand of the User.
“Where there is life, there is growth
Where there is age, there is evolution.”
~Charles Darwin
Thank you so much for reading this article. I have added information from different websites and I thank them for their view on this topic. Do leave comments on different aspects of Web 3.0 that you think will change us.
The links to pages that helped me understand Web 3.0 better:
Financialit.net: How web 3.0 is transforming the financial services industry?
https://www.finextra.com/the-long-read/231/how-ai-is-powering-the-future-of-financial-services
