Cryptocurrencies like Stellar (XLM) and Ripple (XRP) might not be unfamiliar to many here now, but “Fintech” is a new word. It’s a contraction of “Financial technology.” The term describes new ways of doing old things. More specifically, it refers to a new generation of financial services that aim to bring those services to people who have traditionally been marginalized from the banking sector because of a lack of resources.
For instance, if you are an immigrant worker in, say, you and Western Europe need to send money to your family back in some country in Subsaharan Africa, you can’t use the bank system. Why? Because the chances are that neither you nor your family has a bank account, even a savings one.
Even if both parties did have a bank account it would still be inconvenient because the procedure is very bothersome, it takes several days, and it’s quite expensive (it’s usually a percentage of the money you are sending). So what’s the option? Fintech companies.
Fintech is finding ways to make the global financial services cheaper, faster, safer, and more efficient in such a way that people who couldn’t afford them in the past, can afford them now. Paypal is probably the most famous example.
So how can fintech firms afford to do the same job as banks, only better, at lower cost, at higher speeds and more securely? It’s all about technology. They’ve found the way to harness the power of the internet, mobile phones, and telecommunications technology and turn it into a financial advantage.
It sounds like an easy answer, but you should take into account the traditional financial system is probably the industry with the most inertia in the world.
It’s always been very conservative and slow in adopting new technologies. If we talk about settling international payments, banks still use the SWIFT system which came online in 1975, and it still has not updated its technology in any meaningful way.
But there’s a missing ingredient here. There’s another piece of technology that the fintech industry is beginning to discover and it’s quickly integrating it into its services and technology: the blockchain.
Stellar and Ripple – Two Best Examples of Bridges Between Fintech and Blockchain
Leading the way in this regard are two blockchain projects: Ripple and Stellar Lumens. They both have a native token (XRP and XLM, respectively) and they’re working hard with both fintech and traditional financial companies so that cryptocurrencies and blockchain technology eliminate all the friction that remains in both systems.
While both Ripple and Stellar were founded by the same person (Jed McCaleb), he dropped out of Ripple to found Stellar which is the organization he currently leads.
Ripple’s aim from the beginning was to create a platform and a series of software products that run over a blockchain and use the XRP cryptocurrency to mediate the settlement of payments across borders. They’ve been so focused on that goal that, for years, the possible case uses for XRP as a retail currency or as means of storage of wealth was completely neglected (that is changing).
Ripple has secured lots of interesting strategic partnerships with some of the world’s most important banks so that they join the cryptosphere at least as users and clients, if not as investors.
Stellar is a different animal. Unlike Ripple, it hasn’t always aimed to help the financial industry, but to be a third generation blockchain project in which decentralized apps and smart contracts can be deployed or issued by its users.
Then IBM decided to adopt Stellar Lumens as the platform of choice for all of the giant’s projects based on the blockchain. This changed the game for Stellar because IBM already has commercial relationships and partnerships with about 90% of the world’s banks, so it became an opportunity just too good to pass.
So now you know it. Fintech is taking over the world and cryptocurrencies are the engine it’s using to achieve it.
And why should this matter to you as an “average” crypto enthusiast? It’s quite simple. These two projects (there are more, such as Electroneum) are finding ways to make cryptocurrencies useful for everybody, even for people who can’t use a computer or don’t know they’re using digital assets indirectly.
That will end up creating demand for those assets which, in turn, will make them more valuable at the crypto exchanges. This will change the market. It’s currently driven by speculative pressure, but as assets such as Ripple’s XRP and Stellar’s XLM gain ground, they could transform it into a real market, driven by economic forces.
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Disclaimer: This article should not be taken as, and is not intended to provide, investment advice. Global Coin Report and/or its affiliates, employees, writers, and subcontractors are cryptocurrency investors and from time to time may or may not have holdings in some of the coins or tokens they cover. Please conduct your own thorough research before investing in any cryptocurrency and read our full disclaimer.
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