Over the past decade, financial technology (FinTech) has been a major driver of innovation in the way traditional financial services firms operate. It disrupted routines in everything from payment processing to forecasting and budgeting, spawning the fintech behemoths we know today, such as Stripe, Deel, and Brex.
As a new computing primitive, Web3 marks a fundamental paradigm shift that cannot be replicated by traditional fintech tools in Web2. Fiat currency for cryptocurrencies, bank accounts for digital wallets, and limited liability companies for DAOs, these features have created a new class of financial applications that will drive a new round of innovation in fintech.
So we see history repeating itself how fintech can continue to create great value in the new wave of Web3. This article will paint a picture of the future of Web3 financial tools and show why it is quickly becoming the next exciting frontier in startups and venture capital.
Web3 Financial Instruments Map
Fiat currency entry and exit channels
As Web3 reimagines the new world of financial management, the fiat on-ramp is the bridge that many people use to cross the border.
They provide a convenient way to directly convert fiat currency in your bank account to cryptocurrency in your wallet, and then explore and interact with applications on the decentralized web.
Fiat on and off channels are a fundamental part of the infrastructure and have quickly become the first fintech tool in Web3 used by many.
Cryptocurrency has firmly established itself as a form of digital currency, and payment gateways are the gateway for users to use it. They enable merchants to accept cryptocurrencies as a form of payment in exchange for goods and services offered to customers.
Payment gateways are a key component in moving commerce from fiat to cryptocurrency by providing buyers and sellers with a way to transact seamlessly.
By removing centralized entities and replacing them with smart contracts, payment protocols are crypto payment gateways in their purest form. They enable truly permissionless commerce between merchants and customers.
Payment protocols are a distributed alternative to centralized gateways to move commerce from fiat to cryptocurrency.
Given their inherent scarcity, NFTs have become an indispensable proof of ownership for any participant in the digital economy.
NFT checkout is a way for buyers to purchase NFTs frictionlessly using a credit or debit card.
NFTs can represent everything from credentials to community members. Given their importance, NFT checkouts offer users an easier way to acquire them.
Payroll and expense management
As Web3 continues to mature as an industry, payroll and expense management becomes a key component of on-chain workforce management.
It helps on-chain organizations streamline their financial operations by paying contributors and contractors and managing cryptocurrency-denominated fees.
Web3 has changed the way work is done, and crypto-native payroll and expense management solutions are key to helping organizations operate in this new world.
Online communities with shared bank accounts began to take root in the form of DAOs, with financial management trying to answer the question of how to manage such an account.
Organizations use treasury management to help manage their on-chain assets through diversification or other means.
Online communities are defined by co-ownership of assets, and money management is a prerequisite for ensuring their sustainability.
At a time when more and more companies are transitioning to digital, fiat currencies are no longer the currency of choice, and spend management must support multi-currency in a new way.
The tool helps on-chain organizations across Web2 and Web3 manage their spending in fiat and cryptocurrencies.
Given that an organization can hold multiple cryptocurrencies at any given time, spend management plays an increasingly important role.
Accounting and Reporting
An organization’s financial activities must at some point be reconciled from the blockchain to the real world, and Web3 native accounting and reporting is the tool of choice.
On-chain organizations use them to track all on-chain transactions from token swaps to NFT minting, across multiple blockchains to ensure compliance.
Even in a new digital world, the transactions of participants must be dutifully tracked and accounted for, so accounting and reporting become a necessity.
As one of the two certainties in life (death and taxes), taxes are inevitable even in a digital world.
Both consumers and businesses can use Web3 native tax software to track and calculate capital gains, income taxes, and more.
Given the thousands of cryptocurrencies and unique mechanisms such as liquidity mining, on-chain tax software is a viable solution to this complex step.
Given the shift to a new computing paradigm, on-chain organizations have created a need for on-chain business intelligence.
The function of the intelligence platform is to process blockchain data for use by Web3 organizations to drive higher quality decision making.
Companies need actionable insights to enter the on-chain world, and business intelligence is a necessary tool to present those insights.
Fintech in Web3
This map represents an emerging category of companies that are beginning to generate significant value in the process of applying financial technology to Web3, but this is just the beginning.
We will continue to see further innovation in tools to support on-chain organizations as existing applications become less and less able to meet their needs, some example areas of new solutions include:
KYC : With KYC increasingly becoming know-your-wallet (KYW), EU regulations put pressure on centralized exchanges to collect information about non-custodial wallets. Regulation may extend to DApps, and certain wallets will be blocked from interacting with DApps if they are known malicious actors. We’ve seen this happen with Tornado.Cash, which uses a Chainalysis oracle contract to block OFAC-flagged addresses. As DApps are forced to meet higher regulatory standards, developers need to use KYC API services to integrate into their applications to handle this regulatory burden so they can focus on their core products.
Subscription management and billing : As cryptocurrencies become an increasingly popular business tool for consumers, current billing models are limited to one-time payments, while alternatives such as volume-based and recurring models are not yet viable. Cryptocurrency-specific subscription management and billing tools will be a solution for merchants, not only enabling their existing business models to migrate from Web2 to Web3, but also helping to manage and reconcile differences in fiat and encrypted subscription data.
Procurement : Permissionless participation in a decentralized organization is a superpower, but can lead to coordination problems, especially when it comes to tool procurement. DAO procurement tools often occur in non-standard ways, with no clear responsible stakeholders within the organization. Given that I expect DAO tools to serve a specific application, the tools needed to serve a DAO are different than the tools needed to invest in a DAO; procurement management software for large DAOs will be a necessity to help cut through the noise to ensure they get the best tools .
Fintech in Web3 will become increasingly important as financial activity continues to migrate on-chain. This is the starting point for enterprising entrepreneurs and venture capitalists to start thinking about this emerging category.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/fintech-frontiers-a-quick-look-at-the-fintech-landscape-in-the-web3-field/
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