Beyond banking: the future of finance and the web

IIt’s no secret that the Internet has reshaped the way society works. Much of our day-to-day activities have been digitized for quite some time now – whether it’s the way we connect with friends and family, our media consumption, or our ability to work together over thousands of miles away.

In many ways, finance has been strangely out of sync with this digital economy. Although parts of our financial infrastructure have been digitized, much of our existing financial system relies on analogue and outdated infrastructure, unsuited to the rapid needs of stakeholders in a globalized economy. Cash remains the primary means of payment for many citizens around the world and is the dominant form of payment in the Middle East, Africa and Latin America.

The pandemic has awakened many stakeholders, who have realized the need to move to a digital-based financial system. The transition has been evident throughout the company. Governments have accelerated roadmaps for central bank digital currencies (CBDCs), with central banks such as the The Banque de France is already demonstrating its capabilities this year. At the retail level, consumers have turned up en masse to contact free checkout payments, with incumbent payment providers such as PayPal enabling payments at checkout in a variety of digital currencies. Money may be king, but digital currencies are coming for the crown.

The next steps in the development of the web will play a vital role in the digitalization of finance. The web has evolved considerably since its inception in the 1990s. Web 1.0, the static web, offered little or no user interaction. It’s easy to forget how Rudimentary Web 1.0 was. Without algorithms to filter web pages, it was extremely difficult for users to find relevant information.

Today, Web 2.0 offers users a fundamentally different Internet. The social web, as it is often called, uses advances in web technologies such as JavaScript, HTML5 and CSS3, to enable developers to build interactive web platforms such as YouTube, Facebook, Amazon and many more. This technology has allowed social media and user-generated content production to thrive through the distribution and sharing of data between applications.

Merging our financial infrastructure with the next iteration of the web can offer some truly extraordinary possibilities. Like the web, finance plays a crucial role in the way we humans interact with each other. In a globalized economy where the web allows us to interact as fluidly with citizens on the other side of the world as with our neighbors, it makes sense that the financial infrastructure allows, rather than limits, the possibility of such interactions.

Emerging financial infrastructure in the form of decentralized finance (DeFi) has even more power than existing web technologies to enable such interactions. We can trade goods with other humans we don’t even speak the same language with, just a mobile phone and smart contract software.

The next step in unlocking this potential will be to integrate this new financial infrastructure into Web3.0. While Web2.0 was seen as a frontend revolution, Web3.0 is a backend revolution, reinventing the fractured data structures we rely on today. Getting there will not be easy. Powered by decentralized networks, such as Ethereum, there are a number of disparate principles for web3.0, including the internet of value, the internet of things and the internet of communication; More importantly, the technologies underlying these areas have now matured to help fill them.

To understand the value of this integration for stakeholders, it is worth considering how the evolution of the web to date mirrors that of the mobile phone. Cell phones were a widely adopted technology and existed for several years before the iPhone, but its invention was undoubtedly a watershed moment in the evolution of telecommunications. When Steve Jobs unveiled the original iPhone in 2007, telecommunications have taken a leap forward and moved to a whole new paradigm, that of the smartphone.

The iPhone was not revolutionary in its ability to invent new technologies, but rather in its vision of combining existing disparate technologies, namely the mobile phone, camera and mobile internet communication device, into one single system. Its creation revolutionized the way we interact on mobiles and ultimately paved the way for innovation in Web2.0.

Just like the iPhone, the technologies for Web 3.0 are already here. Integrating these technologies into a single layer can truly reform our financial system. Blockchain is the key that can enable this successful integration of technologies.

Imagine a new digital economy where participants can integrate their digital wallet with their social media accounts; create the power to monetize their digital activity and empower themselves to better control their finances. By leveraging blockchain, we are gradually moving closer to such a possibility.

Achieving such a revolutionary integration of the web and finance will not be easy, and there will undoubtedly be obstacles along the way. However, by working closely with trusted and regulated innovators in financial services, and those who know how to ensure compliance and security at scale, we can make such a vision a reality.

Guido is CEO of SEBA Bank, a fully integrated banking platform licensed by FINMA. Previously, Guido built and led large global teams at one of the largest banks in Switzerland and influenced market infrastructure with the ECB and DTCC. Most recently, he founded B&B Analytics, an award-winning strategic advisory and risk and risk research firm.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

About Howard F. Martinez

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