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DeFi and Web3 - What Do They Hold For Fintech And Insurtech?

The current banking & financial system is lagging due to its following of outdated central banking policies, moderate interest rates, illegal migration & trade of goods, money laundering, online fraud, and various global restrictions.

And this is the reason global traders are looking for more secure, trustworthy & reliable banking & financial solutions to safeguard their worth.

DeFi

DeFi or we can say - “Decentralized Finance” - A platform inspired by Blockchain technology, allowing parties-to-a-transaction to get, access, and manage a copy of the same data maintained on a single ie. decentralized network. They can edit, change or amend their documents in real-time, provided with the consent of other members. In simple words, no alteration or amendments can take place without the majority of associated members.

Through this, importer-exporters can get peace of mind to execute safe, error-free & reliable financial transactions between them. Suspicion of fraud can be mitigated as everything becomes transparent. Additionally, BNY Mellon’s blockchain technology to digitize global trade is an example of its significance.  

Not only this, but the technology of DeFi also cuts back the processing time for transactional parties. How? They can manage, execute and access their data anytime from anywhere with an internet connection. Also, there are no requirements for physical papers. The data is kept safe online ie. paperless. 

Decentralized finance or DeFi is an umbrella term for financial services, backed by blockchain technology. Know how it is going to help global traders to survive in a post-pandemic economy. Customers can perform all the bank-related tasks such as borrowing, lending, earning interest, buying insurance, trading assets, etc. 

Significance of DeFi For Fintech/Insurtech

Many renowned fintechs and insurtechs brands have started to take advantage of these blockchain-inspired DLT technologies to improve their customer experience. 

Fintechs - key drivers in the development of the banking industry are providing consumers with innovative & advanced ways of managing their money & securing their transactions.

While on the other hand, insurtechs are also leveraging technologies to extend their customer base. Both industries are adopting DLT platforms for applying decentralized functionality into their apps. It will initiate digital trade finance for importer-exporters. 

Web3

It is expected that in 2022 and beyond, Fintechs, Insurtechs and DeFi are going to come together and curb the financial risks allocated with traditional banking and insurance. This achievement is further going to be fueled by Web3.

By utilizing blockchain infrastructure, Web3 can provide open, decentralized database and computer layers as opposed to cloud instances. On the other hand, insurers can store and have access to single claim data by using blockchain’s DLT technology. 

Recommended Read: How Can NFTs Be A Game-changer In Revolutionizing Trade Finance?

Final Words

The financial service industry is witnessing a major shift today, empowered by technology developments such as blockchain and distributed ledgers. According to financial experts, DeFi is going to stay while Web3 is on its rise. It will completely change the face of fintech as various financial institutions are incorporating DeFi functionality in their banking & insurance services to improve customer experience. Otherwise, they would stay behind on the edge of cutting through the competition.