The financial system has changed significantly in the last few years. New technologies have proven it’s possible to make our everyday life much more convenient, safe and profitable. Blockchain erased borders and unsheathed all the weak spots of the modern banking system. Today, we will consider the most significant disadvantages.
Banking is not comprehensive
1.7 billion adults worldwide remain unbanked which means they don’t participate in the financial sector, not able to manage assets, pay online and manage their own money.
People are not financially literate
The majority (59%) of the surveyed Americans cannot complete two simple interest rate and inflation calculations. Financial concepts are too difficult for an average person, so people are not able to manage their wealth properly and take effective decisions.
High intermediary costs
The average cost of a remittance is 7.01% in fees per transaction — and when using banks, it’s 10.53%. There’s a fair question: why do we pay more and do we really need this?
Low transactions speed
Sometimes, transactions take a few days. Today, in the era of the Internet, it seems to be surreal.
Low trust in financial institutions and governments
Three-quarters of Americans say that their fellow citizens’ trust in the federal government has been shrinking. So, in fact, our money is managed by the organizations we don’t trust.
One of the biggest disadvantages of the modern financial system is centralization that leads to inequality. Markets are ruled by a very small group of people that has some of the following privileges: access to many financial opportunities, inside information, financial expertise, significant capital.
According to the research, the top 1% own 47% of all household wealth, while the top 10% hold roughly 85%. So, the rest of the people share 15% only! It’s extremely difficult for average people to start growing wealth.
The government has the power to control money. Currency is constantly devaluated, which impacts negatively on the citizens’ life.
Authorities can freeze accounts, limit access, remove funds from accounts.
According to the recent data, by October 2020, over $11 billion were deposited in various decentralized finance protocols. We hope DeFi solutions will help to make everyone participate in the financial processes and profit. And we are happy to be a part of the new system creation. Are you ready?