This is the traditional financial system, which began with the establishment of banks and fiat money. We enter the finance 1.0 era, when people began putting their money in banks because they believed banks were more secure than their homes. People began to earn a return on their investment (ROI) by putting their money in the bank, believing that this was the ultimate financial system that we could have.
Slow transactions, long queues, high transaction fees, time-consuming, the possibility of error (as things were controlled by humans), problems with borderless transactions, robbery, scams, and other issues with finance 1.0 became apparent over time.
There was no technology in finance 1.0, and all paperwork was handled by humans. The records were kept in register books, which had the risk of being lost or damaged.
After technology meets finance 1.0, finance 2.0 emerges. Now that everyone has a mobile phone and access to the internet, they can manage all of their financial activities such as money transactions, balance inquiries, complaint registration, money requests, account opening, and so on.
Many types of third-party payment network processors or payment gateways, such as PayPal, Visa, MasterCard, and others, have been introduced in the era of finance 2.0 to make sending or receiving a payment easier, more convenient, and possible from home.
The financial system is still not open to the public or under their control. It still has a lot of flaws, such as a centralised system that stores all of the user’s data on a centralised server, which often leads to data leakage. Users must pay money in the name of different transaction/processing fees/charges, and users have no control over the money in the bank. The bank has the ability to freeze or invest user funds at any moment in order to generate a profit.
Finance 3.0 is an open financial system that allows customers more power and minimises or eliminates the intermediary, fees, charges, and penalties, among other things. Finance 3.0 is a permissionless system that is not bound by geographical boundaries or social groups.
To power finance 3.0, we can embrace blockchain technology, which can provide a finance 3.0 system with scalability, transparency, security, and other benefits.