There is so much buzz around the phrase, “Web3.0”. It is sounding like the next big thing. Major Internet and Technological corporations from Google, to Tesla, Facebook and Microsoft and the rest are making so much noise about it. Major financial institutions and FinTechs are not left out. The Nigeria business and financial services must not be left out in understanding what Web3.0 is all about.
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According to Wikipedia, Web3, also known as Web 3.0, is an idea for a new iteration of the World Wide Web that incorporates decentralization based on blockchains. The Economic Times
defined Web 3.0, as the new breed of the internet that aims to be a decentralized version of the virtual world, where users can interact and collaborate intelligently without worrying about the central, data-specific repositories. In this article, we shall highlight what Nigerian FinTechs and their users should prepare for.
Free, Trustless, Zero Authorization Networks
FinTechs and their customers will experience a decentralised internet system. Web 3.0 will operate as an open, trustless, and zero authorization system. This is because Web 3.0 will be built using open-source software, by a free and unguarded community of developers in full view of the world. Second, the Web 3.0 network, by its very essence of it, will enable users to interact publicly or confidentially without the need for a trusted third party. And lastly, Web 3.0 operate under a zero-authorization network, where there will be no supervisory governing body. For example, Web 2.0 was steered by the inception of mobile, social media, and cloud.
However, Web 3.0 will primarily be constructed on three new layers of emerging technologies – edge computing, decentralised data networks and AI.Web 3.0 will be greatly decentralised and personalised than the internet we know today. What does this mean for the financial services?
FinTech companies will have a natural advantage, but banks and other traditional institutions will be able to catch up soon as they have access to large funds, and form collaborations with innovative FinTechs. Financial institutions will need to start now by investing and strengthening their in-house tech capabilities. Partnering and collaborating will also be key, and we can already see that happening.
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AI And ML Will Become Mainstream
AI and ML have been in vogue since 2017 for financial transactions, and they have been used to unlock new revenue opportunities, minimise operating costs, and carry out automation. For FinTechs and InsureTechs, Web 3.0 presents them with a plethora of opportunities such that the use of AI is more focused on algorithmic trading, fraud detection and portfolio optimisation. Lastly, for consumer banks, the use of AI will not only limit fraud by detection and prevention, but also it will be helpful in customer acquisition and retention, in addition to cross-selling and up-selling of personalised products and services.
Web 3.0 Will Simplify Cryptocurrency And Defi
Decentralised finance (DeFi) is clearly defined as a generic phrase for financial products and services, that is open to anyone with an internet connection. These products and services are always open and have no centralised authorities who can block payments or deny access to anything. If Web 3.0 is decentralised and it harnesses the power of blockchain technology, DeFi will stand to play a much bigger role than what it is playing.
Defi under Web 3.0 will eliminate the bottlenecks prevalent in traditional finance, such as inaccessibility to bank accounts or financial services; fears of financial services being clamped down by governments or centralised institutions; premium and hidden charges; and the risk and delay in money transfers due to internal human processes.
Finally, there are several opportunities that DeFi will present to FinTechs and users, which include, the ability to send money around the globe, stream money around the globe, access stable currencies, borrow funds with or without collateral, start crypto savings, trade tokens, buy insurance, and manage one’s complete financial portfolio under one system.
Featured Image Source: FinTech Futures
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This article was first published on 5th January 2022