DeFi. BaaS. Neobanks. BNPL. Even though these terms sound fictional at first glance, they are the future of finance and digital technology as we know it. And as we learned from WIT affiliate expert and noted technology analyst Scott Steinberg, NFTs, cryptocurrency, the blockchain, and more are financial technologies that are disrupting the industry and causing a shift in the market, prompting players to evaluate what the landscape may look like moving forward. This led us to ask: how will innovations in technology affect the industry? And how will these innovations affect other markets?
The Evolution of NFTs
NFTs, or non-fungible tokens, have dominated headlines over the past couple of years, becoming a popular topic of discussion among artists, celebrities, and- you guessed it- fintech companies. The technology, as described by Business Insider, is “a unique digital asset that represents ownership of real-world items like art, video clips, music, and more. NFTs use the same blockchain technology that powers cryptocurrencies, but they’re not a currency.” So, while NFTs aren’t financial products, they work off the same platforms. And that underlying technology offers opportunities for innovation across industries, especially finance.
At their peak, everyone wanted to get their hands on (or make their own) NFTs. But as of late, Steinberg feels that this technology is being met with increased amounts of scrutiny, and for good reason. Over the past several months, we have seen how easy it is to swipe these digital assets and realize how much their value is based on the supply and demand of the piece rather than actual monetary worth. But going forward, Steinberg forecasts a shift.
He explained that right now, NFTs are in their early stages of development; everybody’s trying to figure out how to utilize them appropriately. Companies are asking “How can we monetize this in a way that is acceptable to consumers, and what is this technology going to fundamentally add to the online experience?” Currently, Steinberg is seeing an increase in companies trying to play in the space even though it’s not always been received well. But overall, he feels that NFTs will be a part of finance going forward, whether it’s going to be a major one or not. And as we have seen so far, the space is likely to be rife with litigation over infringement, false advertising, and more.
But what about the blockchain technology these tokens are built upon?
Blockchain to Break Barriers
To evaluate the future of blockchain technology, we must first answer the question: “What is a blockchain?” According to Investopedia, a blockchain is “a distributed database or ledger that is shared among the nodes of a computer network.” A blockchain offers a secure platform for data storage and as we mentioned above, it plays a significant role in supporting NFT and cryptocurrency systems. But Steinberg sees this technology as playing a larger role in finance’s future.
To start, he sees blockchain solutions, smart contracts, and the like as offering a digital system of ledgering where you can track the movement of almost any assets around the world, allowing for the seamless shifting of money or ownership rights to be faster and more affordable. But even though this solution is thought to be protected, Steinberg feels that companies aren’t focused on the real-use cases of this technology and how it could create future security risks.
Steinberg reported: “Many providers are currently concentrated on peer-to-peer payments solutions and quickly moving money online through apps or cryptocurrencies. But, I would think that maybe they haven’t focused so much on issues that pertain to new devices that will be able to store and exchange this information.” For example, your credit card is becoming increasingly smarter and capable of storing information; your whole digital life will live on these devices going forward, which introduces possibilities for fraud, ID theft, or interoperability challenges, especially as biometric technology use rises.
Biometric Data Blunders
While fraud in finance may be fraught on the blockchain, Steinberg also feels that many companies in the fintech space haven’t given enough thought to the rise of biometric technology and how this system of digital identification could impact the industry. Your digital ID travels where you travel, even into the metaverse and virtual worlds, and the fraud that could occur goes beyond a simple stolen password. Steinberg laments, “It’s one thing if somebody steals my password- what happens if they replicate my retina scans or my fingerprints when that’s how I’m getting into my fintech payments and accessing my bank account? And what happens when we enter a world of deep fakes where somebody can scan your digital image, create a twin, and then present themselves to the world as you in a very realistic manner that looks like we would be talking to one another today?”
The issues raised in this space for fintech will only expand as companies race towards a digital and online future where many different devices and touchpoints will use peer-to-peer, online, and crypto-based payments. Steinberg feels that again, this is an instance where the use cases and challenges haven’t been fully thought through. And when it comes to litigation, conflicts over this shift will, by Steinberg’s definition, keep attorneys in business for many, many years. But for now, what is being done in the industry to prepare for this type of fraud?
Preventing Biometric Fraud
When asked about biometric fraud security measures, Steinberg said there are next to none currently implemented. He hasn’t seen security measures that are designed to defend against fraud, opening the door to hackers that could use consumers’ biometric data to, say, break into an ATM and steal funds. Today, rather, we’re seeing a lot of preparation around how these technologies and their proponents will be utilized. We have been increasingly integrating them at airports, factories, offices, and manufacturing centers all around the globe, offloading more and more information to technology.
But as Steinberg said, more and more governments are going to be switching to these digital forms of ID, and that is going to present tremendous challenges going forward. The caveat is this: if it’s high-tech or if it’s online, it can be stolen, it can be broken, and it can be replicated.
If you missed additional insights from our conversation with WIT affiliate expert Scott Steinberg, check out his expert opinion on the wireless industry, virtual reality, and the rise of artificial intelligence. Mr. Steinberg is hailed as one of the world’s most celebrated futurists and strategic innovation consultants. He has been featured in hundreds of media outlets from CNN to TIME to The Wall St. Journal, with the Fortune 500 calling him a “defining figure in business and technology” and “top trendsetter to follow.”
Learn more about our top industry and technical experts in fintech.