As many predict another financial crisis, our money is even more essential. For the most part, money is always on our minds. We need to cover our costs, save a little and think about our retirement.
However, in times of uncertainty, we start to question many decisions we make with our money. We may feel that we are not saving enough or feel less confident when making financial decisions.
Unfortunately, as individuals, there is not much we can do to influence the market. That is unless you are a billionaire like Warren Buffet or Elon Musk. For many of us, our realities are somewhat similar. We need to manage our personal finances in a way that navigates the changes in the marketplace.
After completing my online course in finance, I learned that finance is a tool that should assist us in doing that. If we all have a reasonable understanding of finance, we should be able to benefit from the rewards it can bring.
These rewards do not only include the upward trend of the stock market over time. For those who reach financial freedom, finance is a means to their happiness, freedom and quality of life.
Despite financial regulators doing a good job in setting up systems to ensure that all can benefit from it, there are still some huge gaps. Unfortunately, many of society today are still lost when it comes to managing their finances. Recent articles suggest that 1 in 3 people in the UK are financially illiterate.
However, financial literacy is not the only problem that needs to be solved. Finance as a system affects way more than the knowledge people have about it. Not only can it limit the knowledge of others, but it can cause discrepancies in the quality of life if policies are not made to suit the common man and woman.
In this article, I will highlight some of the problems that we are currently facing today and how finance can help solve them. Thankfully, there are already ideas that are emerging to assist in a more even spread of money through the innovation of finance.
The Importance of Making Finance Available to All
Unfortunately, there have been many points in history where finance has not been accessible to all. Throughout history, we have seen race and class play significant factors in the accessibility to finance.
Despite financial regulations improving, we are still seeing the effects of limited access to finance today. We have fewer black homeowners in the UK, and deprived areas for other ethnic minorities still exist today.
The decisions we make concerning who gets access to loans and savings accounts do not just affect today’s generations. Limited access to finance and financial literacy will affect generations after us.
The democratisation of finance is the push to make finance more accessible to everyone. In doing so, we should improve the quality of life for all people and have a flourishing society. Nevertheless, we still see many discrepancies in the world today.
Many countries are still prohibited to partake in the wealth of the West due to limitations. Even this platform is still struggling to monetise some of its curators in other countries. We also still see a number of poor areas in the UK and other countries due to high crime, underaged pregnancy and more.
One of the most profound conclusions that can be made due to a lack of accessibility to finance is this:
“Poverty is a result of unmanaged risks.”
Financial regulations should be put in place not to limit others, but to protect the common person from risks. That may be risks of fraud, poverty or misunderstanding.
The accessibility of finance to everyone is a fundamental principle that must be met to ensure an increased standard of living for all. And financial innovation is starting to tackle this problem.
Crypto and Where It May Take Us
Whether you think crypto is a bubble or not is irrelevant. Underneath the innovation of cryptocurrency lies a message that is promising for finance. And it is pivotal to creating more wealth in the world.
Decentralisation, the main selling point of cryptocurrency, gives us the opportunity to skip the middle man. Instead of money being held by banks, DeFi promises to allow for safe transactions through its technology.
This technology is a revolution, and there is no wonder why so many people are investing in it. As things like the metaverse come into play, this new way of transferring money opens up doors that were never there before.
Not only do you have more control over your personal finances, but you also have the ability to transfer across countries. This would allow many developing countries to get a piece of the pie. Not to mention, change individuals’ lives in poorer countries by allowing them to invest and trade.
Crypto has the potential to build a wealthier and happier world. There is not one person who has not seen a story of someone making millions from their investments. And although it is unlikely everyone will make millions, the technology provides a better platform to help those who have been left out.
DeFi has a huge use case when it comes to the democratisation of finance. Not only does it bring about further opportunities for the world, but it also puts people in more control of their finances. In some sense, this is a dream come true. However, financial regulators will still need to ensure risks are mitigated.
Encouraging Financial Innovation
Cryptocurrency has undergone much scrutiny by big investors. Like most humans in the world, they probably find it hard to adjust to change. It is even harder for them because they have built their wealth off a strategy that has worked for them, so it makes no sense to change it.
Most innovation starts off exciting with many gaps to fill. Cryptocurrency is no different. Ofcourse, it still has a long way to go, and it certainly needs more time. Usability, information management and regulations are among some of the key problems DeFi still needs to tackle today.
Nevertheless, innovation is slow and steady. Although I personally have not invested in cryptocurrency due to concerns of my own, I do like the grounding idea of DeFi.
Financial innovation is necessary for the success of our world. So, let us encourage it rather than bring it down. Having good productive conversations about innovation is much more useful.
So, what do you think, is DeFi good or bad for the democratisation of finance?