With the outbreak of the COVID-19 virus devastating the United States and international economies, investors are grappling with another recession lasting just over a decade. While the 2008 financial crisis and the coronavirus epidemic are very different, both events caused market volatility and made new technologies possible.

The economic disruption caused by the pandemic also highlights the importance of serving people currently outside the financial system, in both developing and developed countries. According to the World Bank, 1.7 billion people in the world today do not have a bank.

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In the wake of the economic downturn, people have begun to question established companies and traditional systems such as banks. With more than half of the world’s population under the age of 30 and 55% of the world’s population of 7.7 billion people now online, this has become much more than a niche for creating alternative solutions to economic structures. Twelve years after the 2008 financial crisis, people are still skeptical about banks. In addition to high fees and minimal account balances, nonbank organizations cited a lack of confidence and confidentiality in dealing with banks as reasons for not having checking or savings accounts, according to a home survey conducted by the Federal Deposit Insurance Corporation. Combined, distrust (16.1%) and lack of secrecy (7.1%) account for nearly a quarter (23.2%) of the main reasons for not having non-bank accounts.

Distrust of banks has created a demand for alternative financial services, which has increased the number of these alternatives in which people can invest their money. Tech companies were a popular alternative. The idea actually started with the iPhone in 2007 and the App Store the following year. Not only has Apple opened up opportunities for products and services, but it has also created a new way to quickly distribute software while keeping the world connected to the Internet.

Several leading startups have emerged from the economic downturn. Instagram, WhatsApp, Uber, Airbnb, Twilio, Dropbox and Slack are just a few of the successful startups that were founded during the recent recession. In the following years, not only were billions of dollars in brands produced, but fintech startups like Kabbage, LearnVest, and Betterment began to emerge in Silicon Valley and actively moved towards digital banking. These fintech apps have not only removed some middlemen but also radically changed the way people communicate with money on a daily basis.

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Economic isolation
Times of uncertainty pave the way for a better world as people search for more reliable alternatives to the financial institutions that have bankrupted them. Just as the 2008 economic recession crowded out successful startups, the 2020 COVID-19 pandemic will. Today we are seeing an increase in unemployment due to COVID-19. This fall, the US Bureau of Labor Statistics reported that long-term unemployment, or the number of people unemployed for 27 weeks or more, jumped to more than 2 million, the highest number so far in the recession caused by the coronavirus pandemic. . While some have returned to work, the data shows a marked increase in unemployment over the past seven months.

With continued anxiety, consumers and businesses are turning to banks and credit unions for financial assistance, government support, and advice on how to deal with the ongoing economic storm. Yet organizations are failing, and unfortunately, existing protection systems such as healthcare, testing, protective equipment, and supply chains have collapsed due to poor leadership and delays in response. As in 2008, consumers turn to technology in search of solutions.

An opportunity for DeFi
Today, this opens up tremendous opportunities for fintech, especially decentralized finance, as it can provide more residents with access to financial services. Like the new cryptocurrency trend in 2020, DeFi reduces brokers like banks, which increases the speed of transactions. According to the industry site Defi Pulse, the total value of DeFi platforms has grown by approximately $ 12 billion per year. As central banks cut interest rates to a near-zero target rate, investors are looking for new returns and are now ready to explore DeFi.

Fundraising has been a challenge for fintech companies over the years, especially in the early stages, as investors tend to focus on startups with clear business models. However, the economic downturn has drastically changed the perception of Bitcoin (BTC), DeFi, stablecoins, privacy, and more.

Source: CoinTelegraph