A recent report by a local newspaper in Spain reported that the profitability of banking in the country has fallen Since they only earn 0.25 euros per 100, they mobilize. This could have been caused by the recent COVID-19 pandemic.
The media noted that The average return on equity (ROE) of the six Ibex 35 banks fell to 4.35% at the end of September. according to the quarterly financial statements of the sector.
Despite the fact that some banks saw their results improve in the third quarter, getting a good result from the data was not enough.
The assets of the six Capricorn banks currently amount to around 3.1 billion euros. And the average ROA (Return on Assets) was barely above 0.25% at the end of September, down from 0.54% a year ago. In other words, they barely make a profit of 0.25 euros for every 100 euros they mobilize.
To recreate the scene a little Banco Sabadell is the company that has suffered the most recently. At the end of September, the ROA rose from 0.4% to 0.09% in 12 months. A 77.5% decline similar to Bankia’s increasing from 0.4% to 0.1%. Likewise for Bankinter, Santander and BBVA, all with a drop in profitability that they got from their assets by more than 40% over the last year.
Actually, Banco Santander recently announced an employment regulation act (ERE) for 4,000 people and the relocation of another thousand employees to other banking subsidiaries.
Likewise, the company, chaired by Ana Botín, plans to close around a thousand offices. As part of his digital strategy, Vozpópuli learned from sources familiar with the negotiations. Next Tuesday the negotiating table will be formed and the time will start to count to reach an agreement with the unions.
New alternatives: DeFi
In spite of all this, it is quite noticeable to see the bank sinking, going through a complicated scenario, facing a big change, or perhaps facing the end of its time.
At this point the exponential growth of finance over the internet comes into context, that was significant and constant. A situation that has brought about the appearance of a multitude of innovative financial models. Models that want to grab people’s attention by giving them multiple benefits.
This is where the alternatives FinTech and DeFi are created. Two alternatives that aim to bring a wide variety of products and services to people in the financial world.
And it is that decentralized funding enables people to conduct endless operations through the quick and secure exchange of digital money. This enables a significant advance that overrides traditional financial models.
DeFi adapts to the process generated thanks to the introduction and use of digital money or cryptocurrencies. Thanks to this tool, direct communication is possible between the parties who will carry out the transaction. All of this regardless of the country it is located in, as its operation is based on the use of a smart contract for blockchain.
The DeFi, which is integrated into the DApps for decentralized applications, is intended for the provision of financial services by banks. They are possible thanks to platforms like Bitcoin and Ethereum, which serve as the base or first layer so that they can be operated. Almost all DeFi applications are based on the Ethereum blockchain.
For some, DeFi is a renaming of Open Finance, a concept that has been hanging around libertarian forums for a long time and occupying sporadic university gatherings.
Although the DeFi ecosystem’s DApps are not only intended for non-banks, they are viewed as integrating tools. Anyone with Internet access, regardless of where they are, can use it. DeFi applications decentralize finances and make them available to everyone.
DeFi’s most popular services include decentralized lending. In fact, several protocols are already available to act as a meeting point between lenders and providers without the need for intermediaries.
In this way, both parties avoid the rigorous credit and banking analyzes that a central institution normally needs when applying for a loan, even if it is not very high. It is often sufficient to register in the DApp or simply download it. These types of applications usually work with their own cryptocurrencies, or tokens, to provide credit. MakerDAO is an example.
In essence, tools like DeFi made it possible to move forward quickly. All of this to achieve absolute independence for financial exchanges across these platforms around the world.
However, many goals are still required to achieve full development of these systems. Above all, so that the barriers that have been erected by traditional banks for years can definitely be broken.
The evolution of the banks
Now, amid all of this new digital financial technology, traditional banking has evolved too. With that in mind, we can create a picture of what the near term future of global finance will be.
With the widespread growth of technology and its use to develop secure platforms, the confidence that decentralized systems will be built, and the increased use of these technologies to perform day-to-day operations by individuals, companies, or organizations, will greatly increase its global positioning.
Without a doubt, the future of finance lies with FinTech and DeFi, and over time both technologies will consolidate.
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