Digitalization is revolutionizing financial markets on a massive scale. New business models, technologies, and products are emerging every day, profoundly impacting the financial sector and society. This article examines the opportunities and risks of digitalization for the financial market, businesses, and consumers.
The traditional structure of the financial market, dominated by banks for deposits and loans, is undergoing fundamental change with the emergence of digital business models. Alongside the classic players, a multitude of innovative financial companies are now appearing, based either on specialized product ranges (Fintechs) or comprehensive offerings beyond financial services (Bigtechs).
In particular, international online platforms such as Google, Facebook and Amazon are expanding their services to include financial offerings, thereby positioning themselves close to the customer by offering convenient, cost-effective and individual products.
Digital businesses and their risks
Big tech companies and major internet giants like Microsoft, Apple, and Meta could become the new giants of the financial sector, benefiting from significant network effects and the use of big data. Despite regulatory challenges, their presence in the financial market is steadily increasing, particularly in payment transactions, lending and brokerage, and insurance products and brokerage.
Even small, highly specialized fintech companies offer simple and cost-effective financial services by leveraging economies of scale. They focus on product development and customer retention, resulting in attractive offerings.
For consumers, digital shopping represents an improvement in many ways, offering easier operation, more personalized products, and lower costs. However, it also comes with risks, such as controversial business practices and challenges in the areas of money laundering prevention and cybersecurity.
The crypto sector, for example, is experiencing a huge hype, but it also brings new risks for consumers, as regulation is inadequate and abuses such as fraud or money laundering are increasing.
Managing these risks is the responsibility of Parliament as the legislator and the Swiss Financial Market Supervisory Authority (FINMA), the highest supervisory authority for financial markets in Switzerland. FINMA supervises and regulates financial institutions and services, including those working with cryptocurrencies and blockchain technology.
The Swiss National Bank (SNB), as the country's central bank, is responsible for financial stability. Although the SNB has no direct regulatory authority in the area of cryptocurrencies, it closely monitors market developments. At the same time, the SNB is actively involved in various projects researching blockchain-based central bank digital currencies (CBDCs).
Where there are risks, there are also opportunities – especially with new investment forms like crowdlending.
Crowdlending is an innovative form of investment made possible by digitalization. Founded in 2008, Cashare is one of the first crowdlending providers in Switzerland and can rightly call itself a pioneer in the industry.
Cashare allows investors to lend money directly to businesses or individuals, bypassing traditional banks as intermediaries. This form of investment offers investors several advantages:
✅ Firstly, it enables a direct and transparent investment, because investors know exactly where their money is going and what return they can expect.
✅ Secondly, crowdlending often offers attractive returns, as the costs for intermediaries are eliminated and the interest rates are agreed directly between borrower and investor.
✅ Thirdly, investors can Diversify riskby spreading their capital across different loan projects. This allows them to better offset potential losses.
Cashare offers investors a state-of-the-art form of investment that benefits from the possibilities of digitalization and offers attractive returns with manageable risk.
Conclusion
Overall, digitalization is fundamentally changing the financial sector. To capitalize on the opportunities presented by this change, the risks must be identified and addressed. At Cashare, we also pay close attention to risks and present each investment project transparently to investors by disclosing the collateral provided and assigning a rating to each project.
Sources:
https://www.finanzwende-recherche.de/unsere-themen/digitalisierung-finanzsektor/
