When we consider the buzz of financial technology in recent times, one the most popular fields has been cryptocurrency. Today, almost anything can be done via technology, so it was only natural that the world assumed the next step would be digital currency. Particularly after the financial crisis of 2008, many people lost trust and faith in the traditional banking system. Consumers were looking for a new and innovative to handle money without the influences of traditional banks. Cryptocurrency came through with lots of hype and excitement surrounding the idea. Unfortunately, digital currency lacked the most important ingredient of success; value. At that moment in time, there was no value behind the concept and it just became an inflated concept. Unfortunately, cryptocurrency not only failed, but it created a poor atmosphere for fintech innovations on a whole.
First and foremost, cryptocurrency became the buzzword for fintech. Traditional banks were very apprehensive of the concept of cryptocurrency. Crypto’s promises of monetary revolution certainly did little to ease the concerns. Still, digital currency startups continued to develop, spread and hype themselves up. Sadly, many of the startups turned out to be scams, only furthering the distrust among customers and financial institutions.
Additionally, these startups had no interest in working together with traditional banks to ease the process of development and transition. Instead, they listened to no one, accepted help from no one, and as a result, they failed. The real damage for the rest of the financial technology sector was in other more promising technological solutions. The hype of cryptocurrency damaged bank trust in fintech startups. Today, almost two years after the hype of Bitcoin has begun to die down, legitimate financial technology startups are repairing the damage of the delicate trust that was disregarded by the cryptocurrency sector.
The focus on cryptocurrency was also overemphasized by investors. Again, because of the inflated hype of the field, investors put excessive money and energy into it, not really doing their research to learn more about the general financial climate. Ultimately, investors and startups suffered from associated losses and on a whole, fintech lost market trust. Investors also tightened up their purse strings when it came to new and innovative technologies related to finance. As a long-term result, investors are warier of considering fintech startups when pursuing investment opportunities.
There are a multitude of sectors under the wide umbrella of financial technology that have legitimate value and provide practical services to everyday people. One of these sectors is payment processing. These sorts of options provide services that were once not easily accessible to small and medium-sized businesses. They provide a viable and necessary alternative to the giant payment processors so that merchants and customers can have specialized services according to what is most important to their business and daily activity.
Another aspect of financial technology that serves a pertinent purpose is personal loans. With such a strong monopoly that traditional banks hold over the loans services industry, financial technology offers students and small-business owners alike different solutions to find the best opportunities to take out a loan with low interest rates. In this time following the financial crisis, consumers are looking for practical ways to save and spend money. These loan options allow individuals to be more responsible and providing saving methods within their financial practices.
Finally, blockchain technology itself has suffered immensely because of the after-effects of the cryptocurrency hype. This is mostly because of the association between blockchain and cryptocurrency. The blockchain “database” can be used in ownership or provenance of documents, digital assets, physical assets or voting rights. In short, physical databases of information and reliance on contracts can ultimately be deemed unnecessary because of the wealth of knowledge and space of the blockchain databases. This and many other potential applications of blockchain technology are now hamstrung due to its association with the speculative cryptocurrency market.
The realm of financial technology has created innovative and life-changing solutions that will alter the world as we know it now. Unfortunately, the overblown rise and ultimate fall of cryptocurrency has set back fintech on a whole. To reinforce the point, services must have a real value before they can succeed and in today’s world. Currently, there is no real necessity for digital currency. Today, it would be a luxury, but not so much a necessity. Digital assets have a better claim for usefulness, but the market for them is still in its early stages of development. Nevertheless, other aspects of fintech involve real products with real value. In time, the world of fintech, traditional banks and investors need to return to the table to rebuild trust for the sake of progress.