Web3, the third generation of internet services, has slowly begun to shape the financial world.
2018 the World Bank created the bond-i, the world’s first global bond. This technology allows the bond to be completed on the same day and removes the manual and paper-intensive documentation process. That was the first step to the acceptance of new technology.
Web3 helps to distribute technology and the possibilities for digitizing financial trade lifecycle processes such as security, treasury functions, asset servicing, etc.
Here are some parts of the banking system where Web 3.0 is impacting:
Introduction to DeFi
One of the components of Web3 in banking is decentralized finance, also known as DeFi, which was developed using blockchain technology. With DeFi, it is now possible to decentralize lists, ledgers, and financial instruments from a centralized organization like a bank. Therefore, there will be no need for a middleman during transactions.
Since Web3 does not allow a central control system, it will be difficult for unauthorized persons to access client property and financial records.
Automated Advisory Services
Financial companies are deploying automated financial advisors to assist users in making financial decisions at a low cost and better profit. There are also digital wealth management advisory services to estimate users’ net worth through smart wallets, which monitor and learn users’ habits and needs.
There will be a decrease in transaction and settlement fees for international money transfers, which have historically been challenging to achieve but can be done now in the blink of an eye. Transactions that took days to complete before, with the aid of Web3, now only take seconds.
Only financial institutions that accept the technological advancements that Web3 offers will rise above others and use them so that their services will not become obsolete.
Decentralized technology can be a boost or a threat to institutions depending on how they decide to use it; whatever the case may be, it is up to the bank.
As technology evolves, the impact of Web3 on the banking system will continue to grow. Will this affect traditional banking systems positively or negatively?
Share your thoughts in the comments section below.
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