Disclosure: The views and opinions expressed herein are solely those of the authors and do not represent the views and opinions of crypto.news editorial.
Traditional finance has been failing for a long time, but its cracks have always been ignored. Under current economic challenges, these cracks are finally becoming apparent, and the shortcomings of the traditional financial system can no longer be overlooked. Currently, approximately 1.4 billion people remain unbanked. About a quarter of the world’s population is left behind by industries that thrive through exclusion and inefficiency.
Traditional financial institutions continue to exclude those without documentation, credit history, and access to stable infrastructure through outdated models. This model works for a specific segment of the population and has not changed noticeably over the years to increase inclusivity. But blockchain and a new generation of neobanks may hold the answer to financial inclusivity in this new era of digital finance.
High fees and transaction delays
Even beyond inclusivity, traditional financial systems have outdated processes that prove unmanageable in today’s fast-paced digital age. Consider international remittances. Banks still take days to complete cross-border transactions, and they also add hefty fees. Transfer fees can be as high as 6.35% on average, which is significant considering the value of currencies in developing countries.
Neobanks built on blockchain infrastructure are looking to change this. Such platforms remove the need for intermediaries, making transfers faster, seamless, lower cost, and in near real-time. The use of decentralized networks eliminates the friction imposed by traditional banks and creates a financial system that serves everyone, not just a privileged few.
Financial inclusion is more than access
The issue of financial inclusion is not new and has been a buzzword in the industry for years. Banks have come under constant scrutiny for having overly complex onboarding processes, which are denying socially challenged individuals access to key financial services. The majority of the world’s unbanked population lives in developing regions where financial institutions either do not operate or have insurmountable barriers to entry. The emphasis on documentation and credit history has shut out many people and created an unequal and unfair global financial system.
Neobanks are challenging this problem by moving beyond paper-based identity verification and adopting decentralized models. Technologies such as behavior-based identification models through blockchain (also leveraged by WeFi) can help people who have been locked out gain access to banking. These next-generation systems will help provide financial identity and access to equal financial opportunity to users left behind by traditional banks.
The illusion of ownership in traditional finance
When you put your money in a bank, you generally expect it to be safe. You expect your funds to remain in your account untouched and without any financial problems. This is an illusion created by traditional financial institutions. Banks have full access to your funds and use them for loans, investments, and other purposes. Most banks operate on a fractional reserve banking model, which is a very weak system. If there are too many withdrawal requests in a short period of time, these banks tend to fail. We have seen several cases like this during the COVID-19 pandemic. Therefore, the perception that you have complete control over the funds in your bank account is just an illusion.
Neobanks, especially platforms that offer non-custodial accounts, are a good solution to this problem. Users retain full ownership and control over their assets, and banks and third parties do not rehypothesize those assets. This type of autonomy is critical to fiscal resilience, especially in times of economic uncertainty.
Data abuse issue
Another major drawback of traditional finance is its approach to data. Centralized systems accumulate vast amounts of personal information from customers, creating honeypots for cybercriminals. The financial industry is a prime target for data breaches, with the sector accounting for 27% of all data breaches in 2023 alone. These centralized systems leave individuals vulnerable to identity theft, fraud, and other forms of cybercrime, with little accountability on the part of financial institutions.
Blockchain-based neobanks eliminate this vulnerability by decentralizing data. In this model, individuals are in control of their personal information, and the transparency and security of blockchain makes data breaches less likely.
What about volatility?
When users hear about neobanks and blockchain, the first thought that comes to mind is that cryptocurrencies are unstable. Its wild price fluctuations are of great concern to the public.
Stablecoins offer a solution that provides the stability of traditional currencies while maintaining the speed, transparency, and security of blockchain technology. These create a way for users to avoid risks associated with volatile assets and ensure stability and predictability of financial transactions.
The future of finance will inevitably revolve around stablecoins, as they offer a clear path to financial inclusion without exposing users to the high-risk nature of the broader crypto market. That’s it. These digital assets make financial services accessible, transparent, and trustworthy to anyone, anywhere.
TradFi is failing globally and decentralization is the solution
The rifts in traditional finance are deepening. For too long, banks have controlled money and decided who can participate in the financial system. As a result, billions of people have been left behind because they lack documentation, live in remote areas, or simply cannot afford to pay the fees. This system is broken beyond repair, and it’s time for something new.
Blockchain-powered neobanks are the perfect solution to remove the barriers that have excluded many people from basic financial opportunities. By offering decentralized, inclusive and transparent alternatives, these platforms represent a future of finance where everyone can participate, regardless of location or economic background.
Maxim Sakharov
Maxim Sakharov is Group CEO, Co-Founder and Director of WeFi, an on-chain non-custodial neobank. With over eight years of management experience in the IT industry, Maksym brings a diverse skill set that includes strong leadership, operational excellence, and service delivery. He has served as CEO and co-founder of Exflow and founder and CEO of Whitemark. His career spans a variety of environments, from start-ups to established IT development companies, and he has successfully managed operational performance across the Asia Pacific region. His strategic approach to management focuses on optimizing processes and improving team performance, enabling organizations to grow in competitive markets. Through his extensive experience, Maxim has established a reputation for fostering collaboration and innovation, making him a valuable resource in any operational environment.
