Businesses are faced with numerous challenges which have continued to affect the trust and confidence of traders as well as investors. Here are some central issues need to be addressed in the traditional financial markets.
***Complicated Regulations Prevent Both Internal and External Trading Opportunities
Over the recent decades, traditional financial markets have encountered the majority of changes in regulations, which leads to several challenges and issues. Financial institutions most often organized around “banks” are now engaged in a broad range of complex financial transactions and operate in various markets⎯banking, insurance, and capital markets⎯to take on and lay off risks on behalf of their costumers.
Due to heavily complex regulations, traditional sectors are still inaccessible for millions of people, especially the crypto community. Moreover, the cost structures are non-transparent and disadvantageous to most users. Also, traditional banks are very selective in the services they provide for crypto users within their current banking systems.
***Big Investors Don’ t Know Where to Put Their Cash
As global crisis makes government and bank bonds look increasingly unattractive, institutional investors and high-net-worth individuals (HNWI) are finding themselves with plenty of cash but nowhere to put it. Pension funds and insurance companies are desperately looking for safe havens which promise even modest returns.
***Companies and Projects are Struggling to Raise Capital
Ironically, while the crypto community, global HNWI and institutional investors are desperately seeking quality investment opportunities for growth, there are thousands of great companies and projects struggling to get their plans and capital needs recognized through traditional initial public offering (IPO) process.
Traditional methods are expensive and full of middle men with a long list of fees. Every step in the process requires specialized bridges built between multiple hands-in middlemen who in turn keep the process flowing. Multiple hands each having their own individual technology stacks requiring specialized decoder rings for each, so in order that they can all function. The average time required for new commitments to be put to work now stands at three years with no end in sight.
According to a recent study, over 94% of new businesses fail during first year of operation. The lure of money leads founders to grossly underestimate the time, effort, and creative energy required to get the cash in the bank. [The process is stressful and can drag on for months as interested investors engage in “due diligence” examinations of the founder and the proposed business.]
***Increasing Competition from Financial Technology Companies
Financial technology, often shortened to fintech, is the technology and innovation that aims to compete with traditional financial methods in the delivery of financial services. Financial technology companies consist of both startups and established financial institutions and technology companies trying to replace or enhance the usage of financial services provided by existing financial companies.
Global investment in financial technology increased more than 2,200% from $930 million in 2008 to more than $22 billion in 2015.
“Global Fintech Investment Growth Continues in 2016"