Thought Piece | Innovation

How Web3 is changing the future of finance

Author: Liam Springate-Jones
Date: 24/01/23

How Web3 is changing the future of finance

Web3 is a catch-all term for the next evolution of the internet, which will be built on blockchain, cryptocurrency and NFTs. While it’s still in its early stages, web3 is already a major disruptor in the economy with the current wave of digital technology – and it’s having a rapid impact on a variety of industries, namely finance. Web3 promises to redefine financial systems, rendering them more secure, effective, and integrated.   

In 2022, total web3 investments reached more than $23 billion and there’s a new wave of cryptocurrencies that are set to support the rise of web3. This includes smart cards and tokens, which represent a shift towards a more open, secure, and decentralised internet. Web3 technology has the potential to revolutionise parts of everyday life and how people engage with online platforms – but what does this mean for the future of finance?   

Decentralised finance

Decentralised finance (or “DeFi”) is a financial ecosystem that presents a unique way of delivering financial services. It removes the traditional intermediaries, such as brokerages, banks, or exchanges, which creates a much more open and streamlined financial system. DeFi is a component of web3 that has been fast gaining momentum in recent years.  

Rather than using traditional bank transactions, DeFi uses technology like smart contracts to self-execute the buying and selling process. While most of today’s banks are controlled by centralised systems and authorities, the rise of the web3 decentralised model gives the ownership of data back to the end-users, paving the way for an open network. There are several major advantages of Defi, including:

  • Improved transparency – with blockchain technology, all transactions are publicly available to everyone using the system. Decentralised finance offers an open-source network, which allows any customer to understand what kind of transaction has taken place.    

  • Greater efficiency – a lack of intermediaries means faster transactions and a much more effective service.    

  • Immutability – decentralised finance solutions make it virtually impossible to manipulate any record or piece of data on the blockchain network. Decentralised technology, like blockchain, enables true immutability because all transactions remain permanent and indelible.  

Web3 will no doubt lead to a massive shift in the way people browse the internet. From a business point of view, web3 will create new opportunities for innovation and to better connect with consumers. 

Customer interactions 

Web3 technology is having a massive impact on the way financial institutions interact with different customers. Since web3 enables customers to have full control of their data, this means banks can build more meaningful relationships through personalisation. There’s no doubt that Web3 offers a whole new level of personalisation through permissioned data, which has the power to transform the relationships between businesses and their customers. Web3’s security protocols and open communication could pave the way for consumers to show greater levels of loyalty and trust for banks, leading to more positive interactions. 

The rise of tokenisation

Web3 tokenisation is the process of converting an asset into a digital token that can be traded on a blockchain. It’s one of the most disruptive blockchain-based innovations and could pave the way for a new financial trading system that’s highly efficient and scalable. Digital tokens can provide new investment opportunities, niche assets and more financial products. 

According to research, the global tokenisation market is expected to reach $13.23 billion by 2030, growing at a CAGR rate of nearly 20% during the period of 2023-2030. There’s huge potential for tokenisation and some mainstream banks, like Goldman Sachs, have already begun exploring the possibilities. Goldman Sachs launched a tokenisation platform built on blockchain technology, which is used to facilitate registration, insurance, settlement, and custody of digital assets.  

In web3, tokenisation could form a key building block for the future of finance, bringing quality assets and services into digital environments. The potential for web3 is vast and there are exciting opportunities for both consumers and businesses within the finance sector.   

The next step for your business 

Splendid UNLIMITED is a specialist design and development agency, with strong experience in building digital web experiences for brands. We’ve worked with HSBC to design and deploy Connected Money, the first open banking app, and we also served as Barclay Card’s innovation partner, helping them with their strategy and product innovation.  

Put simply, we understand how digital and web3 technology is shaping online experiences. Web3 is expected to continue to expand over the next decade, with many exciting developments and projects underway. If you’d like to find out more about our expertise in this space, or have a challenge for our experts, contact our New Business Director Stuart Hobbs for further details.