Open FinTech Will Eat Closed FinTech

in LeoFinance3 months ago

Hey Jessettlment services

Fintech is probably one of the biggest buzzwords of the last 5 years along with blockchain and cryptocurrency. Everyone who is anyone with a few pennies and a dream wants to build a startup that disrupts payment settlement.

Don't make the mistake that all payment services are equal, Bitcoin is not a payment service, yes it's part of the ecosystem but it is an asset and a network with its own fixed monetary policy, remember this because it will be important later down the line.

So why do so many companies want to get into the Fintech space? The money of course, duh! Banks all around the world have had a monopoly on sending and receiving money while remittance companies like Western Union have been scalping people sending money home for years.

They've both got so big and so complacent they don't see the need to innovate, making them primed for disruption. You'd think with all that customer data, capital and entrenched network effect these companies have.

Be it internationally or having local dominance they'd bother to improve customer experience yet we're seeing new Fintech companies spring up all the time.

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The bar for Fintech is pretty low

I have nothing against Fintech apps they are providing service consumers clearly want and value, the likes of AliPay, Venmo, Ant Financial, ApplePay, Cash App/Square, PayPal and so many regional ones are picking up the slack where banks left off.

But I have to admit the bar is pretty low and it just seems like a latch on rather than a solution. These apps, for the most part, allow you to connect your bank account, buy other assets like stocks and crypto (not always real just promises of the asset) and instantly send it to those in your network.

It works great, it gives you the illusion of quick and instant finality but int he bank ground it's still the same old payment system, clearing settlements between banks and taking a fee for it.

How they make their margin is on the capital you leave with them and the internal transfers between users in the network. It's a good business model, but you can see one big flaw can't you?

Stuck in a system

All these payment services are closed systems, Cash App users can't send to PayPal users, Apple Pay users can't send to Venmo users because it would kill their business model, cut into their margins and allow far too much competition for margin and give customers cheaper financial services in the process.

Great for the user, shit for the company who wants to simply eat some of the bank's lunches they didn't want to extort from you or rather have the will to do it aggressively enough.

Why do you think these apps don't allow you to withdraw your Bitcoin like PayPal for example, because they know competing with an open network is not good for business.

The instant funds can leave the PayPal network freely it will move to the place with the cheapest transactions or the highest yield in returns or rewards.

Can't compete with an open network

This cornerstone of their business model will be their downfall, with solutions like lightning and RGB coming to Bitcoin it's only a matter of time.

  • Bitcoin doesn't need to market to users to download a specific app, or do KYC.
  • Bitcoin doesn't need to onboard merchants to use a specific account or POS system.
  • Bitcoin doesn't need you to have a Visa or Mastercard.
  • Bitcoin doesn't need API's and connections between institutions for settlements
  • Bitcoin doesn't need forex and international clearance through networks like SWIFT
  • Bitcoin won't even need you to send Bitcoin once the RGB network is live.

Where I see this going is once lightning and RGB are fully integrated into wallets you could either send sats via lightning or USDT, TEUR or whatever stable coin you wanted across the network it doesn't matter. All these are, are tokens locked in a smart contract and backed by Bitcoin.

You won't need to use the same service as I do, I could use Ledger LIVE, you could use Jaxx or Exodus wallet, the front end will not matter, the network will do all the heavy lifting.

Additionally, with these cost savings from not having to run your own infrastructure means Fintech, companies will be able to move some of their margins into retention, to give you earnings for using their wallet, such as cashback rewards.

They could offer you time-locked contracts with interest to secure your capital to go out and raise funds or borrow against them to improve operations, offer other fintech services like loans backed by crypto that is not fractionally done.

We're only at the beginning stages of what the Bitcoin Network will be able to do, and to me, this is super exciting

Have your say

What do you good people of HIVE think?

So have at it my Jessies! If you don't have something to comment, comment "I am a Jessie."

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from what i see i need to gather more and more cryptos!

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That’s why I’m trying to get to one bitcoin. It might be unit bias but I think it will open a world of opportunities in the future for this stuff. Lock my bitcoin in a smart contract for a period and get rewards from new tech utilizing it. Sign me up after the bugs are worked out lol

Lol stack as much as you can once the network is fully operational the more liquidity you have the better! Pretty sure companies will be chomping at the bits for Bitcoin capitalisation and pay investors a premium for colleteral

@chekohler, Sometimes Centralised Market Competitions leads to Customer Restrictions. This is new era and Blockchain and Cryptocurrency Space is changing the minds of individuals towards the Participation and Creation of Financial opportunities. Stay blessed.