The digital transformation of the capital markets industry has been a hot topic for the past few years. It has been a significant shift in the way that people invest and transact. The adaption of digital assets, along with blockchain infrastructures, has placed tremendous pressure on stock exchanges, marketplaces, and trading vehicles.
The legacy solutions, which are currently the widely used infrastructures of financial institutions, are not as transparent and fast-paced as their new tech counterparts. Blockchain and Web 3.0 have been gaining traction attributed to the decentralization aspects as well as the ability to move finance fast without unnecessary regulations.
Tech companies are disrupting the current capital markets framework by decentralizing it. Crypto and blockchain-based technologies have been making waves in the industry with their decentralized and transparent nature.
Tech companies like Exberry and Etoro are moving the capital market industry into a fast-paced, highly efficient environment. Exberry provides a cloud-native SaaS solution for exchanges and marketplaces, enabling anyone to open up a marketplace through their platform. If you think about it, traditional players should be worried about the quick integration and adoption of platforms like that.
The Gen Z generation is already investing heavily into cryptocurrencies, with 59% of Gen Z and 46% of millennials believing they can become millionaires by investing in cryptocurrencies, according to a survey by the research company Engine Insights. This is a strong indication that these generations are highly supportive of the blockchain framework and the ability to move into a more decentralized environment.
At first, it seemed as though capital market veterans are seeing blockchain more like a trend than an actual threat.
But now it is very clear to see where the wind is blowing. Yes, legacy infrastructures are convenient both in terms of prices and way of doing things, but we are seeing a streamlining of blockchain-based startups that are providing affordable and highly effective integrations in order to remove legacy barriers and provide better time to market for financial institutions, as well as a much better native experience for traders.
When zooming out for an overview glance at the options laid out for veteran capital markets institutions, we are seeing several choices:
One of the main problems with traditional financial institutions is the lack of transparency across markets and asset classes. This makes it hard for new entrants to enter this space because they have no way of knowing what assets are available for purchase or trade on a given market or exchange.
Another obstacle that these players face is the lack of standardization across markets and asset classes. This means that they cannot move assets from one market to another without incurring transaction fees and delays in settlement times, which limit the ability to efficiently execute trades.
The third challenge is the lack of liquidity in these markets and asset classes, which creates high barriers to entry because any new entrants have to wait for market makers such as banks or institutions with a lot of money and liquidity.
Another issue is the lack of technical infrastructure, which includes APIs, exchanges, and data feeds. This makes it difficult for new entrants in emerging markets because they have no way of connecting to global marketplaces and trading platforms without a lot of upfront cost or time investment.
What emerging fintech startups in this space promise are the ability to bridge these gaps and do it consistently and with scale. What is really exciting about this is that the decentralization aspect will not only come from the blockchain infrastructures; it will also come from the ability of traders to decide what they perceive as a legit token or coin.
That is why when companies like Exberry announce that their Saas platform is asset agnostic, it means more to decentralization than any specific coin or currency. It means everyone can open up a marketplace that makes sense to them, with rules and regulations that are not forced but rather chosen.