For a college master application, I had to write a two pages note on the domain of fintech. I thought it would be interesting to share it here and have some feedback! Here's the final part!
All the advances of the past decade could be swept away and replaced by the ones emerging technologies will bring. New challenges and stakes arise from the opportunities that will be created. We should consider and define them carefully since they will pave the path of fintech's industry for the next decades.
Blockchain on its side paves the way for transparent, decentralized financial services. The technology provides a trustless payment system and a way to create secure money on the internet. This payment system technology has been improved in several ways. In 2014, the Ethereum blockchain brought the possibility to complexify transactions thanks to smart-contracts. This innovation has created a whole world of possibility composed of new tools, like ICO, and old financial instruments. The platform Opyn.co, for instance, is developing options for cryptocurrencies. Developments were huge in the past years, but we still have difficulties to grasp all the potential of the technology.
Because of the decentralized nature of the technology tribes will be essential in blockchain ecosystems. This community aspect was already important with the social trading platform eToro, for example. However, with use cases like Decentralized Finance, this characteristic has a much more important aspect. The project Synthetix.io proposes a way to do trading with a platform secured by its community. Each participant collateralizes its assets with an 800% ratio. It makes the platform secure up to eight times the value of emitted assets.
Last but not least, regulation and security. Because of the fast-moving fintech ecosystem, regulation will have a significant role in mapping the future path of fintech. It is both a matter of consumer protection and governance. Stablecoins are products in blockchain that have the value of a pegged currency. They are not issued by Central Banks since only the value is pegged to the token. In April 2020, the Financial Stability Board recommended Central Bank ban stablecoins if countries couldn't control them. The FSB expressed doubts about the store of value character of stable coin and argued that they could be a threat to fiat currencies. Fintech's regulation differs between countries and is still blur for emerging technologies.
All in all, I would like to emphasize the complexity of the domain. Fintech is at the intersection of finance, business, technology, social science, and law. The diversity of subjects linked to fintech is what makes it so innovative. The innovation can be various and because of emerging technologies, can take brand new forms. However, the trends we have seen will certainly define the future of the industry.
