A Brief History of Fintech: From PayPal to DeFi and Beyond

By: George Koynov

How real innovation always shines through

What do we talk about when we talk about fintech? The disruption of the legacy banking systems, the latest tech innovations, the upcoming mass adoption of cryptocurrencies? Sure. But what we really talk about is human needs and desires.

Let’s face it, all we want is to get through life as painlessly and as effortlessly as possible. We try to avoid the obstacles and barriers stopping us from getting one step closer to a carefree existence. Existential and unfulfilled human needs often create economic niches, which in turn create profits for those who manage to quickly and successfully fill them. In our 21st century world driven by tech innovation, such niches can often seem like cracks that run right down to their very core of otherwise well-established industries. Let’s take banking for example. One could argue that there have been an awful lot of cracks appearing within the ossified banking industry these past couple of decades.

“There is a crack in everything, that’s how the light gets in.” –Leonard Cohen

Back in 2002, in the midst of the Internet’s mass adoption, one of those proverbial cracks in the banking system was becoming a bit too wide to ignore. And PayPal shone its light right through. PayPal’s successful peer-to-peer online money transfer solution should have served as a warning sign to banks everywhere. Bank should’ve taken the hint and started investing in tech incubators. They, unsurprisingly, didn’t think to do that. Perhaps they were busy playing their greedy games and dragging us towards the financial meltdown of 2008.

Ever since that crisis shook up the world, consumer needs have been drastically shifting and, again, banks have not been in any particular hurry to adapt and leave greed behind. In fact, their excessive operational fees have been driving younger customers away. Turns out millennials prefer interacting with their bank via their smartphone, rather than going to a physical branch like their parents. New fintech startups, such as Revolut and N26 have started leveraging technology to deliver banking services directly to this the millennial consumer. Legacy banking has only just recently become concerned about any of this. By recent estimates, traditional banks’ revenues are going to be significantly disrupted by 2023. That’s one reason major banks have suddenly become extremely keen on working with fintech startups and integrating new technologies into their services portfolio. There is, however, one breakthrough fintech technology that the banks are still scratching their heads about.

Blockchain, Bitcoin and DeFi

Created in 2009 without the intervention of any central bank or monetary institution, Bitcoin become the world’s first open monetary network. Suddenly, everyone in the world was able to become their own bank. The ability to send, receive and store cryptocurrency became accessible to everyone with an Internet connection. The peer-to-peer blockchain network completely eliminated the burdensome reliance on a transaction intermediary. No more operational bank fees and ridiculous transaction costs being unfairly passed on to consumers. Bitcoin’s scalability solution allowing off-chain transactions, called the Lightning Network, has kept on growing and expanding by the hour, further solidifying BTC as a global currency.

Then about a decade later, we witnessed the next major stage of the blockchain-driven fintech revolution – Decentralized Finance. DeFi introduced a wide range of financial operations that could be performed on a blockchain (mostly running on the Ethereum ecosystem), making the reliance on centralized bank lending services even less needed. With interest rates far surpassing those of legacy banks, as well as a comparatively low barrier to entry, DeFi’s global popularity exploded during 2020 and 2021, giving banks everywhere, if you would pardon the pun, a proper run for their money

This brings us up to now, Q4 2021.

Ushering in a new digital economy with truly borderless money transfers, social media giant Twitter recently enabled instant Bitcoin payments via its platform. Powered by Strike, the world’s leading digital wallet built on Bitcoin’s Lightning Network, Twitter users can send each other zero-fee micropayments using Bitcoin. In addition, marketplaces can now use Strike’s API to enable instant, global payments. All kinds of online and brick-and-mortar shops can now choose to accept BTC from customers. This fintech solution is a cheaper, faster and completely borderless alternative to traditional bank or card networks.

The fintech revolution may not really be televised, but it is clearly happening and visible on the blockchain. With the ever more increasing mass adoption of innovative payment and self-banking solutions to satisfy our human needs and desires, the road back to forced dependency on the traditional banking system is quickly becoming the path less taken.

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