The SVB collapse caused great turbulence in traditional banking – Is FinTech here to help?
The recent collapse of Silicon Valley Bank has revealed endless horror stories for the financial services industry. The traditional banking sector felt the hardest impact of the crash, raising questions about their stability and fund safety.
As customers become more vigilant, interest in alternative banking is starting to increase, including fintech solutions, which offer safer and innovative options for money management.
Turbulence in traditional banking
Other traditional banks have actually seen increasing deposit withdrawals after the SVB incident. Indeed, banks such as Western Alliance Bank (“WAB”) and Pacific Western Bank (“PWB”) have already seen increasing mass deposit withdrawals following the SVB horror stories.
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On a larger scale, several venture capital funds have advised their portfolio companies to withdraw the funds from the bank. Major players in the venture capital industry, including Founders Fund, Union Square Ventures and Coatue Management, have expressed concern that their portfolio companies could be caught up in the bank’s potential failure.
As a result, they have recommended that their portfolio companies move their funds to alternative banking solutions that provide more stability and security. This highlights the growing importance of fintech and alternative banking solutions in the eyes of venture capital investors and their portfolio companies.
Fintechs to the rescue
As traditional banking is hit hard, fintech companies are starting to launch solutions to fill this void that poses long-term financial consequences among employees.
In the wake of the SVB collapse, we see more solutions like what Equitybee has done with Equity Value Finder, or how other fintech companies are offering new tools to help customers navigate this challenging time.
For example, some companies like Wealthfront offer virtual financial coaching sessions to provide guidance on budgeting and savings, while others are introducing new mobile apps that enable seamless investment management.
The rise of cryptocurrency also creates new opportunities for alternative banking solutions that provide increased transparency and security. As customers continue to seek more diversified and flexible financial options, fintech companies will play a central role in shaping the future of the industry.
On a larger scale, customers are now increasingly skeptical of keeping all their money in one place. This is where crypto comes in: offering alternative banking solutions can see an increase in business.
Crypto on the Rise… Again?
The crypto industry is worth about $1 trillion and countries all over the world are starting to regulate it. These countries understand the potential of crypto and are embracing it by establishing comprehensive regulatory frameworks.
The regulatory frameworks established by several jurisdictions, including the European Union, Hong Kong, Singapore and Australia, provide stability essential to maintaining a robust banking and financial system. These frameworks also recognize the distinctive characteristics of blockchain technology and crypto by adopting new rules that accommodate them.
This provides an opportunity for crypto service companies to demonstrate their effectiveness as a hedge against risk in traditional finance. Coinbase Global Inc.a publicly traded cryptocurrency exchange platform, has already witnessed a consistent rise in cryptoassets such as XRP, BNB, SHIBA INU, Monero, among others, showing exceptional trajectory in the sector.
The symbiotic relationship between the US dollar and crypto
Coinbase Global Inc (NASDAQ:COIN) is a key player for global customers to venture into the crypto arena. With 110 million verified users and more than 245,000 ecosystem partners, the crypto exchange platform is in the process of providing a safe, easy and accessible way to invest, spend, save and earn.
And while the US dollar still continues to be a global force, crypto is an unknown catalyst to make it stronger. The recent action by the Federal Reserve and 5 other central banks to optimize the availability of US dollar swap lines cements its position as the world’s reserve currency. The use of crypto further reinforces this position.
With Coinbase seeing a superb rise, the wave of decentralized financial platforms leveraging blockchain technology is expected to catapult. This trend can provide accessible, secure and transparent financial services on a global scale. Unlike traditional banks, these platforms are free from autonomous control, making them relatively bulletproof against collapse.
