Future of Insurtech: DeFi and Web3?
The current financial climate has shaken confidence in major institutions around the world. As a result, they and individuals are looking for new and innovative ways to preserve and generate wealth. Fintech Futures tells us more.
DeFi: How decentralized finance works
DeFi, the first economic tool
A powerful alternative is decentralized finance, or DeFi, the umbrella term for financial services powered by blockchain infrastructure. With this medium, consumers can do most of the things that banks handle more seamlessly, as it doesn’t require administrative acts or a third party.
DeFi has gained ground, fueled by the fact that it reduces human error through smart contracts, gives access to markets from anywhere at any time with an internet connection, and cuts out the middleman. In essence, it turns money into a programmable, interoperable protocol, like what earlier versions of the Web did to digitize information and content.
While decentralized finance is a relatively recent trend, the amount of value in its protocols has reached over $200 billion, with transaction volumes reaching nearly $100 billion per month. Its ecosystem itself is developing rapidly, for example, in terms of diversifying from Ethereum to multiple blockchain infrastructures.
The venture capital world is actively embracing this trend, as recent months have seen an increase in unicorns, such as Anchorage, Fireblocks and Lukka.
What are decentralized applications or DApps?
DeFi’s meeting of the minds with insurtechs
Established insurtechs are already beginning to leverage DeFi and integrate its functionality into their consumer-facing brands. These new companies are leveraging the technology to deliver a better customer experience.
Overview of Insurtech & Its Impact on the Insurance Industry
DeFi is indeed a logical step, especially because insurtechs can seamlessly integrate this functionality into their interfaces, making them more accessible and user-friendly.
At the same time that fintechs and insurtechs are encroaching on DeFi platforms by incorporating decentralized functionality into their apps, new entrants are trying to dislodge challenger neobanks and insurers with differentiated products that leverage blockchain.
For example, several projects, including Juno, Dharma, Linen and Outlet, are launching services in DeFi. Their goal is to provide users with a high-yield savings account that competes with cash accounts from financial startups, such as Wealthfront or Monzo. This is made possible by providing a simple alternative banking interface that seamlessly combines crypto and traditional finance.
What is DeFi and how they can change the future of the financial world
When Web3 accelerates
In 2022 and beyond, DeFi, fintech and insurtech will continue to converge even further, causing an existential threat to traditional banks and insurers. This convergence will open up even broader opportunities beyond the mere decentralization of money flows.
These opportunities will be further fueled by the Web3. Leveraging the infrastructure of blockchain, this technology can provide an open, decentralized database and computing methods, as opposed to siloed servers or cloud instances.
When users browse the Internet and use financial applications, the data from these interactions no longer resides solely on the single application server. It is stored on a shared, publicly accessible ledger.
As a result of seamless transactions and interactions, critical financial functions such as credit scoring, identity verification and fraud prevention will be reconfigured, resulting in multiple benefits for consumers.
The ability for individuals and businesses to transact with entities around the world paves the way for a robust online economic ecosystem. This is especially notable for content and entertainment creators, for whom Web3 offers new and powerful ways to connect and engage with their audiences.
In addition, there are benefits for financial institutions, such as insurers. With blockchain’s distributed ledger technology, they can easily store and access information, eliminating the need to invest in data collection from both the public and private domains. Blockchain can also help banks reduce or eliminate the use of intermediaries.
Everything You Wondered About Blockchain Technology
One answer among many
The financial services industry is undergoing major upheaval driven by technological developments. What is certain is that DeFi is here to stay, Web3 continues to advance and financial services will never be the same.
Financial institutions of all kinds need to start allowing consumers access to DeFi functionality through their banking and insurance services. If they don’t, they will be sidelined by technology platforms that see the future as a combination of ease of use and convenience, and the power of decentralized finance.
Would you like to dive into the defi? Use the best and secure decentralized finance platform: Trade on Venice Swap.
