Is Web3 the future of finance? What are digital ID wallets? Go-to-market motion for Decentralized Finance (DeFi) DAOs | by Sam Boboev | The Capital | Mar, 2022

  • What are AI-powered financial assistants?
  • SEC is probing NFT creators and marketplaces for regulatory violations
  • UK watchdog FCA opens 300 crypto cases
  • Personal opinion: Embedded Finance
  • Go-to-market motion for Decentralized Finance (DeFi) DAOs
  • PayPal stops operations in Russia
  • Open finance use case: Credit Score
  • What are digital ID wallets?
  • Is NFT market cooling down?
  • Is Web3 the future of finance?

A traditional wallet can hold your money, but it can’t help you choose where to spend it. Going beyond the one-stop-shop convenience offered by super wallets, the AI-powered financial assistants of the future could help users make smart, customized decisions about their money.

Artificial intelligence is setting a new standard for consumer-facing financial services apps, signaling that AI-powered “smart” financial assistants could play a major role in the future of personal finance.

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Standard budgeting tools are traditionally limited to historical data aggregation, with only basic analysis or insight. The smart financial assistants of the future will go far beyond this. Powered by AI and ML capabilities and vast sets of consumer data, these assistants will take on the role of a smart advisor who continuously reviews clients’ subscriptions and bills, manages their budgets, proposes saving and investing strategies, and provides other relevant feedback on how to reach financial goals.

More advanced smart assistants may also become more interactive and proactive — discretely notifying users of discounts at their most frequented stores while shielding them from incessant marketing, creating custom budgets, or seeking out the best loan rates and insurance options based on a specific user’s needs.


1. Natural language processing and understanding documents will be key in “humanizing” virtual assistants, as well as in helping them grasp and solve complex financial issues.

2. Privacy and security will be crucial for financial assistants, which will need to access sensitive financial and biometric information to function well.

3. Expect a jump in fintech acquisition activities, especially between different financial services verticals. The 2021 acquisitions of TrueBill by Rocket Mortgage, Charlie by Chime, OliviaAI by Nubank, and Trim by OneMain show a clear consolidation trend among personal finance apps and other verticals.

4. More legacy players will look to offer AI-based financial assistants, such as Bank of America’s launch of its AI assistant Erica and Intuit’s 2020 acquisition of Intuit Mint.

A new generation of fintech startups is already leveraging AI to automate different aspects of money management. AI-powered Robo-advisors Betterment, SigFig, and Personal Capital automate asset allocation, portfolio rebalancing, and tax-loss harvesting, while Robo-advisor-turned-banking-app Wealthfront is testing out its “Self-Driving Money”.

The company’s AI-based Robo advisor creates customized investment portfolios, tracks user saving and spending habits, and offers personalized financial advice.

Beyond Robo-advisors, a number of personal finance apps also rely on AI to offer a customized and automated money management experience.


The probe is looking into whether NFTs “are being utilized to raise money like traditional securities.” The SEC has reportedly sent subpoenas related to the investigation and is particularly interested in information about fractional NFTs, which allow multiple people to hold (and trade) a share of an asset.

Securities are tradable financial instruments, such as company shares, bonds in a government or business, and derivatives based on another asset.

The SEC has traditionally not considered Bitcoin to be a security because it’s often used as currency. Ethereum has gotten a pass because the project has ostensibly decentralized to the point where no single group controls its success.

The federal agency has gone hardest after initial coin offerings, or ICOs, a popular way for cryptocurrency startups to bootstrap their projects back in 2017 and 2018.

The SEC is concerned that cryptocurrency projects are merely finding new variations of unregistered securities — this time with non-fungible tokens. NFTs are blockchain-based tokens that denote the right to sell or trade an accompanying asset such as a digital collectible or artwork.

Though an investigation won’t necessarily lead to enforcement action, today’s news isn’t exactly coming out of the left field. Hester Peirce, known as “Crypto Mom” for her friendly posture to the industry, said in March 2021 that NFTs might “raise the same kinds of questions that ICOs have raised.” She went on to warn investors that fractionalized NFTs could be considered unregistered securities.


The UK’s Financial Conduct Authority (FCA) has announced that over the last six months, it opened over 300 cases relating to crypto asset businesses.

These cases relate to businesses possibly not being registered with the financial authority, as well as potential scams.

A spokesperson for the FCA told Decrypt that a crypto asset business may also have more than one case tied to it.

The watchdog’s announcement adds that the regulator has “50 live investigations, including criminal probes, into unauthorized businesses.” An FCA spokesperson told Decrypt these live investigations don’t necessarily refer to crypto asset businesses either.

“Consumers need to have confidence when making investment decisions, and the data we’ve published today shows how prevalent scams can be,” Sarah Pritchard, Executive Director of Markets at the FCA, said in a prepared statement.

“Before investing, check you know who you are really dealing with, check if they are authorized by the FCA, and do your research to understand the risks that might be posed.”

The FCA is the UK’s supervisory authority when it comes to anti-money laundering and counter-terrorism financing requirements.

Since January 2020, businesses that carry out cryptoasset activity in the UK have been required to be compliant with the Money Laundering, Terrorist Financing, and Transfer of Funds Regulations.

Those same businesses must be registered with the FCA.

Despite this, however, the financial watchdog has repeatedly raised consumer protection concerns as they pertain to the wider crypto industry.

In January 2021, the FCA shared five concerns it had surrounding cryptocurrencies, including price volatility, technical complexity, and potentially misleading marketing.

“Investing in cryptoassets, or investments and lending linked to them, generally involves taking very high risks with investors’ money. If consumers invest in these types of [sic] product, they should be prepared to lose all their money,” the FCA said.


I would like to add my two cents in addition to the comments by Efi Pylarinou and Paolo Sironi on embedded finance and its potential benefits both for financial and non-financial companies.

Today I read through Fintech Trends for 2022 by Erlang Solutions. The report is very insightful, especially comments by then fintech thought leaders.

Embedded finance is one of the topics I am most interested in, therefore, analysis and comments on it caught my attention.

As Dr. Efi Pylarinou says, ”It has taken two forms in the market. One through existing financial services providers growing their stack of services via fintech Saas providers. The other form is non-financial companies now offering financial services. For example, Apple in the US is offering its own credit card, Tesla is offering insurance, and Shopify is offering business banking.”

However, I would also say it is not only banks and non-financial companies that are benefiting from embedded finance but fintechs too. The next step in the evolution of embedded finance is to enable fintech to become super apps that would consolidate customers’ lifestyles in one place.

This, in turn, means embedded finance integration should simplify not financial integrations but non-financial lifestyle products too. For example, just like Tesla and Shopify, which are expanding their ecosystems, fintechs should be able to integrate shopping experience, booking services, ride-hailing, or delivery into their own ecosystems.

Perhaps this goes beyond the initial embedded finance concept, therefore, we can call “Embedded Finance 2.0”.

In this context, we will get the hyper-personalized experience customers are seeking for.

As Paolo Sironi says, “Ultimately, it is the opportunity to eliminate the friction in user interactions that make banking contextualized to become embedded and unlock ‘new’ value.”

How do you see the future of embedded finance?

One major category of decentralized applications is decentralized finance (DeFi) applications, such as decentralized exchanges (e.g., Uniswap or dYdX) or stablecoins (e.g., MakerDAO’s Dai). While they might have similar go-to-market motions as a standard, non-decentralized application, value accrues differently due to the organizational structures and token economics.

Many DeFi projects follow a path where the protocol is first developed by a centralized development team. Following the launch of its protocol, the team often seeks to decentralize the protocol in order to increase its security and to distribute the management of its operation to a decentralized group of token holders.

This decentralization is typically accomplished through the simultaneous issuance of a governance token; the launch of a decentralized governance protocol (typically a decentralized autonomous organization, or DAO); and the granting of control over the protocol to the DAO.

So what does go-to-market look like for DeFi DAOs?

Go-to-market metrics for DeFi DAOs: With new go-to-market strategies for web3 come new ways of measuring success. For DeFi apps, the canonical success metric is the aforementioned total value locked (TVL). It represents all the assets using a protocol or network for things like trading, staking, and lending.

However, TVL is not an ideal metric to measure long-term organizational health and success. Although new DeFi protocols can copy open-source code, offer high yields, and attract significant financial inflows and TVL, this is not necessarily sticky — traders often leave as soon as the next project pops up.

The more critical metrics to track, therefore, are areas such as number of unique token holders; community engagement frequency and sentiment; and developer activity. Additionally, since protocols are composable — able to be programmed to interact with and build on each other — another key metric here is integrations. Number of and type of integrations track how and where the protocol is used in other applications, such as wallets, exchanges, and products.


It shut down its services early on Saturday in Russia, citing “the current circumstances,” joining many financial and tech companies in suspending operations there after the invasion of Ukraine.

“Under the current circumstances, we are suspending PayPal services in Russia,” President and Chief Executive Dan Schulman said in a statement. He added that the company “stands with the international community in condemning Russia’s violent military aggression in Ukraine.”

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A company spokesperson said PayPal will support withdrawals “for a period of time, ensuring that account balances are dispersed in line with applicable laws and regulations.”

PayPal, which had only allowed cross-border transactions by users in Russia, stopped accepting new users in the country on Wednesday.

Ukrainian government officials had been calling on PayPal to quit Russia and help them with fundraising.

PayPal said on Friday that “since the beginning of the invasion, PayPal has helped raise over $150 million for charities supporting response efforts in Ukraine, one of the largest efforts we’ve seen in such a short period of time.”

PayPal’s suspension in Russia also applies to its money transfer tool Xoom, A PayPal Service. Rivals Wise and Remitly earlier suspended some services in Russia.


A majority of Americans say they experience financial hardship at least occasionally, and roughly 22% of Americans, or 50 million US adults, don’t even have FICO credit scores.

These numbers represent an enormous opportunity to bring these individuals from the outskirts of the financial system to a place of long-term financial strength — bringing returns for financial services companies that know how to act on the opportunity.

One way to do this is to optimize and augment the credit- approval process via open finance, in the vein of Experian Boost. By using tokenized, credential-free API connections, financial services companies aggregate bank account and transaction data from a variety of sources, enabling financial services companies to get a fuller understanding, when combined with credit reports, of who is creditworthy and who isn’t.

These insights can help the unbanked take consistent steps toward becoming creditworthy. For example, Chime uses transaction history over time to gradually help people build their credit without initially checking their credit. This concept can be amplified even further by aggregating a wide range of account types via open finance, so a company can see total spending in all of a user’s accounts, getting a far clearer picture of each person’s total financial picture.

Financial services companies that access these insights will be well on their way to edge out the competition with this large market segment. As JB Orecchia, CEO at SavvyMoney says, “There’s a direct correlation between consumers starting to track their credit, do financial literacy courses, budget, etcetera, and financial improvement. And you can start to get ahead of the score and take a risk on those folks because they’re going in the right direction.”

With more effective adaptability built with open finance APIs, the possibility to help customers enter the banking system increases. This gives people opportunities they’ve previously never had and opens up new revenue streams for financial services companies that act boldly.


Wallets have long been the go-to carrier for IDs like drivers’ licenses, office badges, and student cards — but now, digital ID wallets are offering an intangible alternative.

These wallets, which are becoming especially important in an era of increased need for vaccine verification and contactless identification, can also securely save a wider range of identifying data, from medical histories to office keys.

The Covid-19 pandemic has pushed governments and businesses to reconsider their approaches to payments, identity verification, and access control, speeding up the adoption of mobile and contactless alternatives in all 3 areas.

Among these, the payments sector has seen the highest adoption of mobile alternatives, resulting in speculation that mobile wallets will broadly replace cash and plastic cards within the next decade. However, mobile wallets have the potential to transform more than just transactions.

A new generation of mobile wallets called “digital ID wallets” are emerging as an all-in-one solution to friction in not only payments but also ID verification and access management. By adding scanning and document encryption to their capabilities, digital ID wallets can offer a secure virtual storage alternative for a lot of what is found in physical wallets today.

The standard digital ID wallets of the future will store payment information along with other essential documents, including state IDs, SSNs, passports, citizenship information, medical records, home and office keys, and even biometric information such as fingerprints and face scans.

These wallets will enable more seamless ID verification, checkout, access, and travel experiences than ever, automatically sharing minimally viable user information related to user activity and transactions. For example, at a basic level, digital ID wallets could confirm a user’s age with the checkout system at the liquor store, share an access card with the security system at an office, or offer passport information to the identity reader at an airport.


The digital ID wallet sector will boom in the next decade, providing customers with a myriad of digital ID options.

As digital ID wallets gain adoption, governments will be incentivized to get on board, partnering with fintechs or launching their own digital ID wallets.

Strong government regulations and policies will be required to manage privacy and the risks associated with digital wallet IDs.

If implemented well, universal digital identity standards have the potential to significantly reduce fraud and crime rates in international transactions and travel.


While anecdotal evidence that the NFT market is beginning to cool abounds, there are no bigger red flags that what’s going on with sales and prices.

The average selling price of a nonfungible token has declined to under $2,000, compared with an all-time high of almost $6,900 on Jan. 2, according to industry data tracker NonFungible. The daily total sales average was about $26.2 million on March 3, the data show. The tally was $160.2 million on Jan. 31. Since Feb. 24, when Russia attacked Ukraine, the average selling price has dropped by about 30%.

Another possible contributor to the decline is the likelihood of increased regulation. The U.S. Securities and Exchange Commission is scrutinizing creators of NFTs and the marketplaces where they trade to determine if some of the assets run afoul of the agency’s rules, Bloomberg reported Wednesday.

Sales of some of the most popular brands are falling fast. NBA Top Shot’s are down 26% in the past week, while Axie Infinity’s are down 15%, according to data tracker DappRadar. While those flagship NFT sales are off, the decline isn’t across the board. Sales of Bored Ape Yacht Club NFTs are up 59% in the past seven days, while CryptoPunk sales are up 118%, DappRadar data show.

Many NFT marketplaces have experienced trading-volume declines. OpenSea’s trading volume is down 30% in the last seven days, per DappRadar. Rival platform LooksRare’s volume is down 16%. Even popular game Axie Infinity’s volume is down 21%, per DappRadar.

“Trading volumes are down in general, but the demand measured by the number of unique traders and sales count is increasing,” said Pedro Herrera, senior data analyst at DappRadar. “So while we’re seeing less volume, there’s more activity, even though Ukraine’s conflict is definitely driving away the attention from trading.”


I came across a great article by Rita Martins, Head of fintech partnerships, global functions at HSBC, which explains how web3 could potentially turn to be the future of finance.

As Rita highlights, there are three main technologies that are pushing the borders of the web3 further into traditional finance and changing it the way it is.

Decentralised Finance (DeFi)

Although in its infancy, DeFi is already creating a parallel financial services world with a total value locked (TVL) of $239.44bn (as of January 2022).

This new vision has the potential to open up access to the estimated 1.7 billion underbanked and unbanked since anyone can open an account as long as they have an e-wallet. However, to reach its full potential, the DeFi community needs to bridge the gap between traditional financial services and the new DeFi experience. User interfaces and experience must be improved, and the risks associated with ‘being your own bank’ must be mitigated.

Decentralised Identity

One of the innovations of Web3 is that each user will have a unique digital identity. Currently, users access online services by using a username and password. Users have a separate account per service provider, leaving them with a multitude of passwords and a fragmented identity experience. Additionally, users lose ownership of their identity as each service provider controls their data.

In the decentralised model, users store their verified credentials — a passport or driving license — in a digital wallet. The decentralised model goes further if we consider the cryptographic concept of zero-knowledge proof, in which two parties can validate data items without ever disclosing the data itself. In this new world, the user’s personal information is fully protected and controlled by them.

Creator Economy

Web3 has reignited the creator economy by returning ownership. According to the US business magazine Fast Company, “more than 50 million people globally consider themselves content creators, and the market size has grown to well over $104bn”. Creators can now own the platforms, products, and communities they create. They also have voting rights and can fully monetise their services.

The opportunity for financial services companies lies in bridging the gap between cryptocurrencies and traditional banking while tailoring it to the creators’ needs, such as providing loans based on predictable future income.

My personal opinion.

Web3 definitely has the potential to change the current state of the thing in finance.

I can already see super apps or super wallets are already addressing the case with identity and consolidation of the customer’s financial and lifestyle services when the customer has one account and can access multiple services in one application.

The thing companies need to solve here is which infrastructure they will be building and launching their apps on traditional or blockchain.


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