Web 3.0, or Web3, refers to a new generation of the internet that makes use of blockchain and tokenisation. If Web2 is an internet where users create and consume content, Web3 is expected to give users new opportunities for financial ownership. 

The result would be a decentralised internet where peer-to-peer (P2P) transactions are more affordable and there are fewer obstacles to investment. For this reason, it is expected to have a major impact on FinTech. 

I am an accelerator program manager at Tenity Singapore, helping Web3 startups ideate, grow, and secure funding. Based on my expertise in this area, in this article I explore the intersection of Web3 technologies and finance.

In this post, I cover:

• What is unique about the intersection of Web3 and FinTech?
• Three innovations worth watching in FinTech and Web3
• Three companies that are innovating in FinTech and Web3
• How Tenity operates at the intersection of Web3 and FinTech

What is unique about the intersection of Web3 and FinTech?
Web3 is primarily understood as an opportunity for a decentralised internet. As Conor Svensson points out in his weekly blog on Web3, if Web2 is about internet users reading and writing online, Web3 is about new forms of ownership.

As such, it is seen as a more democratic form of the internet, made possible thanks to technologies including:

• Blockchain, a distributed ledger that securely stores transactional data. 
• Tokenisation, the representation of physical assets by digital “tokens”. These tokens can then be “fractionalised”, i.e. split into smaller items and freely traded.

So, what does all this mean for FinTech? 

If financial transactions, ownership, and trading are at the heart of Web3, I see two unique possibilities that Web3 and financial technology allow.

1. Web3 will enable FinTech companies to create more innovative products a lot more quickly
   The current financial landscape is dominated by large institutions which control the way that money is stored and accessed, and the way that assets are exchanged. 

   Within this landscape, FinTechs typically work to transform the way that finance is experienced, but they largely leave the structure intact. That is because FinTechs often have to work with incumbents to launch new products. For instance, Revolut, N26, or others might make it easier or cheaper for customers to manage their money, but they still rely on the existing financial infrastructure to make it happen. 

   On the other hand, Web3 has the potential to transform this landscape entirely. 

   For instance, blockchain as a technology offers the opportunity for a decentralised financial system. Rather than transactions having to pass through large institutions and their intermediaries, they can be made in a truly peer-to-peer manner. 

   In practice, cash can be transferred directly from one digital wallet to another, then that transaction can be recorded on the blockchain. With blockchain networks, the transaction is essentially time-stamped and cryptographically linked to all the other transactions that came before it. This way, transactions are secured without the need of a centralised financial institution. 

   What does this mean for the FinTech industry? Technologies such as the blockchain give FinTech an opportunity to create new products based around this decentralised system of ownership.

2. Web3 will allow FinTechs to move money even more cheaply, making finance more accessible
   In our current financial landscape, it can still be quite costly to move money across the globe. 

   Say you want to transfer US$1,000 to the Philippines peso. You will need to pay a conversion fee and an admin fee, and then the recipient may be charged by their local bank too. These fees add up. According to the World Bank, as of 2020, the average US$200 remittance costs 6.5% to send abroad. 

   While FinTechs solutions have done well so far to reduce these costs, Web3 can make financial transactions even cheaper—in any currency, whether traditional fiat currencies or crypto. Again, this would be powered by blockchain technologies, such as Ethereum, to be truly peer-to-peer.

   In this way, Web3 does not just help consumers, but B2B players too. For instance, Ripple is a payment settlement system that uses the XRP Ledger to allow financial institutions and businesses to send money instantaneously and in a much more cost-effective way. 

   For FinTechs, there are plenty more opportunities where they came from. For example, at Tenity, we have supported FinTech startups to build additional products on the XRP Ledger, during our XRPL accelerator in Singapore. 

Three innovations worth watching in FinTech and Web3
Web3 has the opportunity to transform the financial industry. But what innovations show the most promise?

From my perspective, there are three use cases that are the most exciting right now.

1. Decentralised Finance (DeFi) and tokenisation: democratising access to investment opportunities
   Typically, to access many financial platforms and investment opportunities, you need to be an accredited investor. You often need a certain net worth, with a certain amount in a given institution to access certain products, such as bonds. 

   With Web3, on the other hand, anyone can access these financial products.

   One of the best examples of investment’s greater accessibility is the tokenisation of bonds. Bonds are often used only by institutional investors or those with significant capital. But by tokenising these bonds, they can be broken down—or “fractionalised”—into smaller investments. This way, bonds become more accessible to smaller investors, to create a more dynamic and inclusive bond market. 

   Another area where tokenisation is possible is real estate. While the average person may not be able to buy property as an investment, tokenisation can allow the cost to be broken down in the same way as bonds. It allows investors to purchase a smaller stake in a property and then be able to take a share of the rental income. 

   These solutions are opportunities for a more democratic access to investments. Fintechs could support this opportunity, by innovating new apps or platforms through which customers can access tokenised investments.

2. Stablecoins: a digital currency with a less volatile value
   Over the last decade, cryptocurrencies have been widely adopted. But so far, they have faced a challenge: their value is often too volatile for them to be reliably used. 

   You only need to look at Bitcoin to understand the problem. The value of Bitcoin went from about US$6,000 in December 2019 to over US$63,000 in November 2021. It then fell again once more to US$18,000 over the following year, according to Investopedia.

   To combat this volatility, Web3 innovators have developed stablecoins. These are a type of digital currency designed to be less volatile, as they are pegged to an external commodity or currency, such as the US dollar or gold. As a result, they become a more reliable, tradable currency. 

   Currently, the stablecoin known as Tether (USDT) is the third largest cryptocurrency by market cap (it is worth US$112 billion, according to Investopedia). Even if it is pegged to USD, Tether poses an important alternative to the fiat currency, due to the fact that it is decentralised—meaning consumers and businesses are able to perform P2P transactions without fees. 

   In future, I expect to see other stablecoins be developed that are pegged to other currencies. 

   Tether Euro and Stasis are two stablecoins already pegged to the Euro. Meanwhile, other FinTechs—such as VNX, Europe’s first regulated stablecoin issuer which we have supported in our recent accelerator program—are developing stablecoins pegged to the Swiss franc.

3. Remittances and international transfers: exchanging money more affordably
   Web3 technologies would make exchanging money cheaper and easier for everyone. As we have seen, international transactions are usually subject to fees and can still take a couple of days to arrive. 

   Plus, if you want to travel abroad, you will need to exchange money. Traditionally, this has also been subject to fee—either at currency exchanges or at the point of sale.

   Thanks to its decentralised technologies, Web3 could change these conventional processes entirely. As we have shown, people could send remittances in a peer-to-peer manner that is entirely secured on the blockchain—even across national borders. These transfers would be low-cost and in real-time. 

   Or, thanks to Web3, it is not hard to imagine a world in which people who are travelling do not need to take fiat currencies with them at all. 

   Rather, if adoption becomes sufficiently widespread, you could use stablecoins in different currencies instead. So, you could instantly change your USDT for Tether Euro, without having to pay exchange or transfer fees.

Three companies that are innovating in Web3 and FinTech
There is no doubt that Web3 is gaining attention across the FinTech world. But who are some of the most exciting players in this space?

• Circle. Circle is the developer of USDC, another stablecoin that is pegged to the US dollar. Unlike some stablecoins, USDC is a regulated coin and Circle is very transparent about its reserves.
  
  Circle has recently produced EURC too, a stablecoin pegged to the Euro. It also has a product known as Circle Mint, that allows you to convert local currency to either USDC or EURC.
   
• OpenEden. OpenEden is a company committed to bringing real assets to decentralised finance, with the aim of making those assets more accessible. One of their major products is tokenised T-bills or bonds. These can be fractionalised and traded at any time, even outside trading hours.
   
• BasedApp. BasedApp is a Singaporean app that is specifically for Web3. When they download the app, customers get a digital wallet and a physical payment card that they can load with crypto, including Singaporean stablecoin. The app can also be used as an investment platform too.

How Tenity operates at the intersection of Web3 and FinTech
Tenity was born as the open innovation platform at SIX, the Swiss Stock Exchange, in 2015. Since then, we have opened hubs in Madrid, Istanbul, London, and Singapore, where I am accelerator program manager. 

For nearly a decade, our expertise has been in FinTech and financial services. We are committed to supporting broader FinTech innovations across this ecosystem, including in Web3. We do that in three ways.

1. FinTech startups get support to develop their Web3 solutions
   One of the most important things we do at Tenity is to design and create accelerator programs. We do this in all aspects of FinTech, including in Web3. 

   These accelerators take two forms:

   • Our own accelerator programs. We run our own FinTech accelerators twice per year in Zurich, Singapore and Tallinn, where we have admitted many web3 focused startups. You can learn more about our programs here: Tenity Programs
   • Custom accelerators for financial institutions. For instance, we worked with Julius Baer to develop their Web 3.0 accelerator in Europe and Singapore. We have also worked with Ripple and ran a 12 week accelerator in 2023 specifically for Web3 startups building solutions on the XRPL ledger. These custom programs are built specifically for the innovation needs of these corporates.
     
     In either case, these programs are a great opportunity for FinTechs to access expertise, support, and funding.

2. FinTechs and financial incumbents get access to expertise and industry knowledge
   Whether you are a financial startup or a corporate, we can provide expertise, skills, and strategy to help you make the most of Web3. 

   During our accelerators, startups can access invaluable mentoring and industry knowledge. For instance, we have expert mentors from the big four consultancies. Plus, we can offer startups free or discounted access to tools that can be useful for their growth. 

   Similarly, we support incumbents with the knowledge they need to work in Web3. Through Tenity, financial corporates can access startups, gain deeper insights into industry trends, and receive support to develop an innovation strategy. 

   We know that it is hard for incumbents to keep track of what is going on in the startup ecosystem. That is why we help by providing corporates with insights into the problems startups are working on and by matchmaking corporates with FinTechs.

3. Incumbents get support investing in startups, while startups receive the funding they need
   What sets Tenity apart from other accelerator programs is that, alongside mentoring and support, we offer startups grants and investment. This may come in the form of a cash grant, or we may exchange grants for equity in the startup. 

   It is not just us who can offer startups investment during our accelerators. We also have a large network of venture capitalists that are often willing to invest. Plus, during the custom accelerators we build for corporates, those corporates are on the lookout for investment opportunities too.

   If you are a financial corporate, this means you have the chance to gain a stake in these new Web3 products. Alternatively, you can invest in our VC fund, so that you can invest in more startups while minimising the level of risk.

FinTech and Web3: An exciting opportunity for further innovation
In this article, I have discussed some of the most exciting innovations that Web3 offers in FinTech. 

With opportunities for new investments, easier and more affordable transactions, and decentralised finance, Web3 could well transform the finance industry completely. And FinTechs have the opportunity to be part of that change.

Read the original article here.