The decentralized finance (DeFi) space has long been occupied primarily by single entities and small companies. For example, crypto investors and small software organizations are some of the primary proponents of decentralized finance worldwide.
Traditionally, financial institutions have treated DeFi with a level of skepticism. Some banks and investment firms have even considered it an existential threat to their business.
But some licensed and regulated financial institutions, like EQIFI, embraced DeFi and launched innovative platforms to connect more customers with decentralized financial products. Banks have an important role in improving access to DeFi products as well, and they could realize significant gains by adopting it now.
DeFi’s Growth Should Serve as a Signal to Banks
DeFi has seen significant growth in recent years. This is due, in part, to the fact that it is relatively new and potentially disruptive. Many investors see DeFi as a growing market and want to get in on the trend early before it expands significantly.
According to Business Insider, DeFi is poised to grow even more in the coming years. In 2022, it could grow 10-fold to become an $800 billion industry. Indeed, assets committed to DeFi projects had already skyrocketed 385% by August 2021 and showed no signs of slowing down.
This should serve as a signal to banks, just as it has been to individual investors. There is great interest in DeFi, especially in emerging economies where consumers are historically underbanked. Embracing it now could give them a better opportunity to tap into this growing market in the future.
Financial Customers Are Shifting to Digital-Only Options
Consumers are rapidly shifting their business to digital banking options. While some consumers have decided to adopt the digital solutions offered by traditional banks, others are switching to non-traditional banks to take advantage of reduced fees, faster services, and digital-first financial products, among other perks.
According to Giuliana Berchicci. Algorand Director of Business Solutions, in a recent interview for PYMNTS, “Banks are grappling with the pressures of customers’ willingness to move to digital-only firms. That’s because banks, as she noted, ‘are not really technology producers.’ These traditional firms are burdened by legacy technologies.”
Embracing DeFi could be a step in the right direction for financial institutions trying to compete with digital and non-traditional players.
DeFi Isn’t as User-Friendly as it Could Be
Finally, traditional financial institutions could not only improve access to DeFi but also expand their customer bases by making it easier and more intuitive to access DeFi products, such as loans. Currently, some consumers are deterred from engaging with DeFi because there just aren’t many user-friendly options for doing so.
DeFi depends on complex technologies, but financial institutions can eliminate much of that complexity for consumers by launching apps and platforms. They should look toward consumers’ adoption of banking apps as a framework for this process. Users will be more likely to embrace DeFi if the tools for engaging with it are simple, recognizable, and easy to use.
Follow EQIFI’s Example
Financial institutions don’t need to look far to see an example of a licensed and regulated bank embracing DeFi.
EQIFI, powered by EQIBank, is building a global DeFi alternative that everyone can use through an intuitive digital gateway. We’re also delivering more financial products than any other decentralized system in history. Our goals are to expand the options of digital asset holders but also to introduce new users to the benefits of decentralized finance.