Disruption to the financial services sector has been marginal at best since the Internet arrived.
Compare the differences in your financial life compared to, say, how you shop (e.g., Amazon) or how you access entertainment (e.g., Netflix) compared to 20-30 years ago. You’d likely say that your post-Internet shopping or entertainment has been more convenient, cheaper, more accessible, and faster. Add on top of that, you probably have more choice than before.
Could you say the same about the way you save, spend, and invest?
At this point I imagine you’ll say that you have more convenient and accessible financial service via your smart phone – and you’d be right. On the ‘front end’ the mobile experience via ‘neo-banks’ (e.g., Venmo) is definitely easier than what you were doing before (e.g., going to the ATM or visiting a bank branch). These mobile first user experiences (UX) have provided a good solution in the absence of peer-to-peer (p2p) payments by the traditional US banking industry.
However, on the ‘back-end’ (i.e., the infrastructure behind the mobile UX) the previous system remains. Most people don’t know how many intermediaries are required to move financial messages from point A to point Z. Therefore, it still takes days for your automated clearing house (ACH) or international wire transfer to happen. It is also partly why you still pay such high fees on your traditional bank account – fees for the bank to have your money – or you pay (via the merchant) around 1-3% in interchange fees to use a debit or credit card.
The life of a SWIFT transfer
What if you could ‘have it all’? The accessibility and convenience of the neo-bank UX coupled with the higher speed and lower cost that comes with an Internet-native financial infrastructure.
This is what you’ll be getting with WisdomTree PrimeTM.
Why didn’t the internet moment happen in financial services?
It seems strange that so many industries have been completely changed once companies found ways to use the Internet to better deliver their products and services – yet finance was mostly left out. Why is that the case? It might not be obvious, unless you work behind the scenes, but from my experience I have seen that almost every financial innovation over the last 20 years was built on a legacy system.
Much of banking and finance is really just moving data around. You can then think of the financial system as a set of pipes that is meant to ‘move money’ (i.e., data) to places where it is needed. These pipes are sometimes awkwardly arranged because they organically developed and were connected to each other over the last 100 years. The legacy system was not designed for the best movement of money (again, data) around the post-Internet world.
This is the system on which the neo-banks built their services. Really, the neo-banks just put a nice, shiny ‘front-end’ to make your financial services feel more accessible and more convenient – but on the back-end the pipes largely stayed the same.
This created problems down the line. The neo-banks tried to build on their early success by improving other aspects of financial services – like lowering costs and speeding up transactions -but they quickly ran into obstacles. Navigating the regulatory landscape is hard because payments is very different to savings or investing. Add to this, while the neo-bank disruptors tried to expand their services, the established players learned from what the disruptors did and then copied and adopted the innovations. You only need to look at your bank mobile apps today vs. what they were 5 years ago to see the influence of the neo banks and the wholesale copying of the original UX innovation.
Replumbing the financial system using new technology
There is reason to be optimistic right now. There are recent changes in technology that mean it is possible to ‘replumb’ parts of the legacy financial system. Some people call this technology ‘blockchain’, but really it is just a distributed database that everyone can have a copy of and use via the Internet. If much of financial services is just moving data around, an Internet-native way of transferring and storing the data could mean faster, cheaper, and more transparent financial services. This in turn means a better experience for you, the person who wants to save, invest, and send money in the fastest, cheapest, and most transparent way possible.
This isn’t totally hypothetical. We have already seen a lot of successful experimentation and innovation with blockchain technology in the DeFi (decentralized finance) space. Examples include tokenisation (e.g., gold tokens) and stablecoins (e.g., US dollar tokens) on blockchain networks, which you can use on your smart phone. There have been missteps though, particularly related to security and regulatory compliance.
WisdomTree Prime – bringing the Internet moment to financial services
While blockchain technology is super cool to people like me, who like to geek-out, most people just want something that works better than what they have today. With WisdomTree Prime we’re trying to provide you with just that: all the learnings from fintech over the past 20 years deployed on a new technical system that offers the best user experience possible for saving, spending and investing. Add to that the safety and peace of mind that comes with regulatory approval and compliance. All of this can happen at internet scale, in a way that does away with much of the legacy financial system. That looks a lot like an internet moment for financial services (finally!) – one that’s faster, cheaper, and more convenient than what was available before.
Important Information:
It is anticipated that the App will be free to download, but that accounts, transactions, services and/or products made available via the App will be subject to fees and other requirements.
The information provided is not intended as an offer or solicitation for the purchase of, or a recommendation associated with, any security, financial product, digital asset, or service or to provide any security, financial product, digital asset, service, or advice in any jurisdiction. Potential Products and Services, as well as applicable launch timing and associated fees, are in development, will require third party relationships (e.g., banking relationships), and may change or may never become available, including due to regulatory considerations. Any information provided and/or plans associated herewith are subject to change without notice and WisdomTree is under no obligation to provide additional information.
Please note that certain digital assets referenced herein, such as bitcoin, are speculative and involve a high degree of risk, including but not limited to, the risk of financial loss. Reference to gold refers to a digital token recorded on a blockchain (e.g., the Stellar network) representing an electronic document of title to physical gold. The price of gold does fluctuate and may be affected by numerous factors including supply and demand, the global financial markets and other political, financial, or economic events, which may negatively impact gold prices and the value of a gold token.
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