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The future of fintech is already here, we are missing cybersecurity and the regulatory landscape. ”Fintech Under the Spotlight” CEE Market Report launched by Unchain Fintech Festival

June 9, 2022, 6:30:00 AM

The future of fintech is already here, we are missing cybersecurity and the regulatory landscape. ”Fintech Under the Spotlight” CEE Market Report launched by Unchain Fintech Festival

In the past 2 years, the global financial industry had to constantly adapt to the fast pace of the forced digitalization determined by the COVID-19 pandemic. It had to overcome a lot of challenges: a straightaway switch to contactless payments, a severe need for invoice payment solutions, and a transition to open banking, among many others. In the first quarter of 2022, the global fintech industry has grown by 27% compared to the same period of 2021.


In this context, Unchain Fintech Festival challenged the banking and fintech professionals of the CEE Region to share their opinion on the main topics that dominate the fintech market or that will do in the near future. „Fintech Under the Spotlight” brings together several experts who shape an answer on how this market will continue to develop.


”Our research revealed that two of the hottest topics in the fintech industry, where the most investments are being made, are the decentralized finance and payments, sectors that had had an exponential growth on the market”, stated Alexandra Pollack, Co-founder and CEO of Unchain Fintech Festival.


The staggering rising of DeFi


Decentralized finance (DeFi), the financial technology system that removes the control of the bank and institutions on money, replacing it with peer-to-peer interactions, shaped a great proportion of the financial systems over the last years. A recent innovation, DeFi appeared around 2017 and rapidly became a grand ecosystem that at the end of 2021 capitalized at over 130 billion dollars. Stablecoins, CDBCs, the metaverse, NFTs and other digital assets are just a few of the DeFi applications.


However, at the moment at least, DeFI is not a stable technology, because it needs the development of other segments of the industry too. According to the „Fintech Under the Spotlight” Report, 37% of the interviewed financial professionals agree that the main issue with DeFi is the low interoperability among different blockchain technologies, followed closely by the lack of insurance to protect the investors supporting these applications against fraud (30%).


DeFi is strengthened by the staggering development of the new payment options too, such as digital wallets, QR-code payments, or encapsulated payments. Although, what keeps this segment from developing at an even higher speed is, according to the experts, the lack of adequate regulatory landscape at a national and international level (33%), high complexity and costs associated with technological implementation (25%) and reduced level of trust and understanding from the end consume (22%).


No regulations for diminishing illegal activities


At national levels, innovation happens as well in the Fintech industry, with Central Bank Digital Currencies (CBDCs), government-controlled digital currencies used by consumers and businesses. According to the report, Sweden, Japan, China, and Nigeria are among the countries that plan to adopt this financial solution in the near future. European Union also has plans to implement this solution.


The advantages are that states could diminish illegal activities like tax evasion or money laundering. The main disadvantages are that we still have no regulatory landscape for the virtual world for CDBCs and that using them could lead to an extended level of control exerted by banks and governments, while the fintech market is oriented to a more individualist approach, where transactions are aimed to be completely decentralized.


For example, the most renowned cryptocurrency, Bitcoin, has the highest level of centralization since we started using blockchain technology, having no influential leadership. Such digital assets, NFTs, gaming tokens and others alike make up a market valued in 2022 at 4.2 billion dollars. However, it is difficult to integrate these assets into the entire fintech ecosystem and connect them with other systems.


Cybersecurity and regulations are highly needed


The future of fintech is definitely bright, but there is still a long way until all these technologies, from DeFi to CBDC to digital assets, will be 100% safe. According to the sources quoted in the report launched by Unchain Fintech Festival, this industry has the highest risk in this sense, with major security breaches being in the banking industry. „88% of all data branches are caused by unintentional mistakes of the employees” is one of the conclusions of the report.


A necessary but not sufficient condition for the development of the industry, cybersecurity must be intertwined with a solid regulatory landscape where clarity, transparency and fairness must be the principles, according to the professionals quoted in the report realized by Unchain Fintech Festival, the first fintech and blockchain event of the CEE region, debuting this year on 13th  and 14th of July in the Romanian city of Oradea.


“Together with Visa and all the relevant experts in the financial and tech industry, we will shape the business landscape in payments, loans, insurance, personal finance, e-commerce, banking, and more. We firmly believe that the regional unicorns we have so far have only just tapped into the big potential of the CEE and, through Unchain Fintech Festival, we aim to grow not just the knowledge and networking of fintech representatives, but also help foster and facilitate the actual innovation and fintech growth of the CEE region,” concluded Alexandra Pollack.


Besides the research project for banking innovation in the CEE, the Unchain Fintech Festival team has been running a series of pre-events to give audiences a glimpse into the startup pitching competition that will be included in the main event in Oradea. The event will give the whole of Central Eastern Europe a platform to showcase the best solutions provided by companies, from one of the most talented and fast-growing regions in the world.


The entire CEE Market Report can be downloaded from https://unchainfestival.com/reports/.


About Unchain Fintech Festival: Central Eastern Europe’s Flagship Fintech Event


Unchain was created to bring together the global public and private sectors to advance the topic of Fintech in Central Eastern Europe and globally. Unchain is supporting the future of finance by connecting companies and people, trends, and challenges. With a two-day festival at its core, fintech and other financial institutions alongside the wider ecosystem stakeholders will meet in a city that is at the center of Central Eastern Europe. Representing the rich past of the region, the festival will help showcase the vibrant digital solutions the region has to offer, as well as bring global trends to the region.


https://unchainfestival.com/