Jesús Peña García, VP of Europe at Damco Solutions and founder of House of Web3 Luxembourg, explains how he expects Web3 to revolutionise the fintech industry.
Web3 is a new era of the internet that has been making headlines in the last 2 years, and aims to disrupt many industries, including the fintech industry. Some banking industry leaders have named Web3 as a key trend for 2023. But what exactly is Web3, and why is it significant for the future of fintech?
In a nutshell, Web3 is about digital ownership. This means that for any product, new solution, or feature developed under this new approach, the governance of the application will promote user-centric environments and promote decentralised infrastructures. But don’t confuse Web3 with cryptocurrencies, or imagine that any Web3 application is related to cryptocurrencies or tokens. That’s not the case.
How can Web3 be useful in fintech applications?
1. Building from Communities
Web3 and communities are closely linked, as building communities around financial products can provide businesses with significant benefits such as increased customer engagement, loyalty, and cross-selling products. There are numerous opportunities for fintech companies to leverage these advantages, including through liquidity programmes, loans, co-ownership, investment, trading multi-asset exchanges, and product placement.
By exploring these possibilities, fintech businesses can create new and innovative products that meet customer needs while fostering a strong sense of community and loyalty.
2. Digital identity using Web3 wallets
Logging into Web3 applications will be easier than ever, implementing decentralised wallets as digital identities will enable users to securely manage their digital identities without relying on centralised authorities. With the use of cryptography as core, Web3 wallets provide a decentralised and tamper-proof solution for authentication and transaction verification which is more secure and trustworthy than current applications where user credentials have been hacked in banks to fintech applications in the past years.
In addition to managing digital identities, Web3 wallets also enable you to store and manage various types of digital assets such as NFTs, tokens, and cryptocurrencies. This means that users can easily access and manage their digital assets in one place. Bye bye to remembering user passwords and using multiple applications.
3. Metaverse as a playground
Even if at the end of the day the metaverse has not lived up to the hype, the opportunities for the financial industry to develop new products under these virtual worlds are huge, for example with the integration of virtual banking services.
Users can access virtual banks within the metaverse, allowing them to manage their finances and make transactions using digital currencies seamlessly. I’m talking about financial inclusion and new opportunities for people if the financial or banking industries are able to map virtual or digital identities with real identities, and the solutions that Web3 can bring to the unbanked, which is still a global problem.
4. Digital Money, Crypto currencies and CBDCs
With Web3, digital money, cryptocurrencies, and Central Bank Digital Currencies (CBDCs) can be easily integrated into various online and digital platforms. We can integrate them into social media applications, e-commerce sites, or gaming platforms.
This provides all users with greater flexibility in how they use their digital assets and unlock new opportunities for businesses to accept different forms of payments. This ease of use can help to eliminate some of the barriers that have previously prevented the widespread adoption of digital currencies. And this will also signal the end of some centralised crypto exchanges.
To successfully navigate these new developments, it is essential for the financial and banking industries to increase awareness and engage in discussions around Web3 use cases, navigate ecosystems and test new scenarios. A confident and ambitious approach to decision-making will enable them to take charge of these changes.
To sum up the future of fintech in just a few words, it is 100% digital, decentralised, and community-driven, where individuals will have greater access to financial independence and control over their own assets. It’s time to start building.
This article was first published in the Silicon Luxembourg magazine. Get your copy.
