Money is no longer the commodity it was a decade ago. And yes having money does give one a sense of relief, and control and helps realise ones vision and goal but how we acquire money is changing, and so is the form of money. With the changing business landscape and the digital evolution, the only way one can define their digital future is by becoming familiar and maybe looking at new digital assets especially if you are seeking funds for your business.
Gone are the days of depending on a bank loan or family and friends investing in your business. And according to Cryptovecs Capital, cryptocurrency lending offers high yielding gains through margin trading on specific exchanges by lending cryptocurrencies. And this move has resulted in traditional financial institutions slowly losing their grip on the market because they are no longer the only option for individuals and businesses.
Lately, thanks to technological advances digital currencies are taking the centre stage but the spotlight isn’t being shone on non-traditional financial institutions as yet. Despite all this, it still seems as though familiarity still wins. However, non-traditional financial institutions could offer solutions to some of the challenges faced by ‘traditional’ financial institutions because there is less red tape involved.
We can’t deny the role that financial institutions play in spearheading activities needed to have a thriving economy. But COVID-19 has turned this on its head by forcing the financial industry to revaluate its business model which has opened doors for other non-traditional financial institutions and their lending or fundraising models even if it’s still on a small scale. A good example is custodian banks.
According to Cryptoves Capital’s managing director John Lombela, custodian banks, are often overlooked because unlike traditional banks the core function is to secure the assets of individuals and firms even though it doesn’t offer direct customer services such as lending, collections and deposits.
Regardless of this, based on their financial requirements and business models there are many types of non-traditional financial institutions such as insurance companies, venture capital firms, brokerage firms, currency exchanges, and lately cryptocurrency exchanges could assist.
Fortunately, a start-up company could seek the help of a venture capital firm to raise funding for their business, while another entrepreneur could seek the services of currency exchange firm to move funds to expedite the service delivery to their customers.
“The 2008 economic recession forced many businesses to reinvent themselves and explore avenues that would streamline their services and financial operations with the use of internet services.” Lombela adds that this was increased with the birth of Bitcoin and the Blockchain technology that completely transformed how businesses are run and money is exchanged.
“The advent of these technologies have ultimately put pressure onto existing traditional financial sectors and spearheaded the adoption of some of these latest technologies innovations for some while others have adjusted to incorporate the fourth industrial innovations into their operations; such as blockchain technology, artificial intelligence, machine learning and many more.”
And with technology forming an integral part of the infrastructure and undeniably contributes to the acceleration of services offered within or through the underlying infrastructure. Lombela says that for non-professionals or non-experienced investors market volatility instils less confidence on the financial instruments they may have invested into. This gave rise to Cryptocurrencies and Blockchain technologies to restore confidence in the financial sector.
Despite this customers have embraced a new normal, or a new and improved way of doing things especially when novel technologies have been introduced, and in other times, customers needs around existing or introduced innovations.
Both traditional banks and custodian banks do offer services that will often work in tandem. The main difference with custodian banks is the ability to provide the holding and safekeeping of assets including digital assets or crypto-assets. This allows them to manage, store and exchange assets including cryptocurrencies and they do not depend on Central Banks.