By Yacoub Haddad | Staff Writer

With the rise of alternative cryptocurrencies and decentralized finance, the world saw a tremendous shift in the way people invest, save, and trade. More and more people rely on digital methods of investing via applications such as Revolut, Wise, and similar neobanks. This poses a serious question: How has the exponential pace of technological advancement enabled the financial sector to meet the rising demand in financial services on a global scale?

De-Fi (Decentralized Finance) is a term often thrown around when it comes to technology within finance. At its core, De-Fi combines the decentralization aspects usually associated with cryptocurrency with aspects of modern financial systems. In specific, De-Fi utilizes secure distributed ledgers like cryptocurrency, to issue, trade, and hold bonds and stocks. De-Fi cuts out the middleman of investment markets, eliminating all forms of added fees to the customer.

The second form of technology that revolutionized financial markets is application-based banking (also known as neobanking). The most prominent example of this type of technology is in Europe, where applications such as Revolut have become market leaders in allowing customers to take control of their own financial situation. Revolut and other similar applications have provided customers with a safe way to pay, save, and invest.

The biggest issue with neobanking and De-Fi is that these new technologies are only available to the more developed countries, as apps like Revolut operate mainly within the EU, and North America. While these apps have propelled the first world economies into a near cashless society, over 90% of the world’s population remains on a cash basis, which only propels illicit activity and prevents governments from properly collecting taxes, further contributing to the significant gap in economic activity and development between the first and third world.

Another significant issue with these websites and applications is regulation. Most of these applications are not properly licensed for banking activity, and promote investment in cryptocurrency, of which 90% are either scams or pure black boxes as to where an investor’s money goes. This is seen with the recent FTX crash, where most depositors lost a significant portion, if not all, of their investment. Another example of a weak regulatory framework and its implications is in the company Binance. Binance is the largest cryptocurrency trading platform, and since it is not a publicly traded company, the general public does not have access to their financials. As a result, people holding their money on this exchange cannot reasonably have confidence that their money is safe.

De-Fi, neobanking, and cryptocurrency will propel the world economy into the future, however, without proper regulatory standards for this growing industry, and no proper plan to expand into developing nations, these untapped segments of the world population will remain behind economically. As the developed countries tend to market efficiency, which will only bolster their nations growth, they only accentuate socioeconomic differences, leaving the developing countries behind.