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Though cryptocurrencies have not reached anything like mainstream consumer acceptance yet, there’s little doubt that they will form some part of the financial landscape in the future.

Fintechs in particular are likely to be positively impacted by growth in cryptocurrency availability and adoption. Below we outline how the future of cryptocurrency and Fintech are increasingly interconnected.

Understanding cryptocurrency

Cryptocurrencies are digital currencies that are not issued or regulated by a central authority, such as a government. Cryptocurrencies are generally stored in a decentralized fashion, though Facebook’s Libra will initially be centralized, with plans to decentralize in the long term.

When a cryptocurrency is decentralized, such as is the case with Bitcoin, transactions are verified using blockchain technology. Blockchain is often defined as a distributed, decentralized, public ledger. In simpler terms, it’s a public database of digital information. Blockchain is a particularly secure method of storing data because it is virtually impossible to manipulate without detection.

Thus, cryptocurrencies are highly secure virtual currencies whose decentralized nature means they are not subject to interference or control by governments, as is the case with traditional currencies.

Cryptocurrency can unlock new Fintech markets

Cryptocurrencies are not very well understood by the average banking consumer who lives in a country with a stable main currency. Unless they’re early adopters by nature, these consumers don’t have much in the way of incentive to adopt crypto over regular currency, and they may even see cryptocurrencies as too risky.

However, cryptocurrencies are more popular and have greater rates of adoption in areas of the world with unstable currencies. For example, in Venezuela, when the bolivar experienced rapid devaluation, cryptocurrency gained considerable traction as a more stable, reliable option.

Cryptocurrencies are also particularly relevant to the approximately 1 billion people worldwide who have a mobile device but no bank account. Being “unbanked”, these consumers can’t use traditional financial products, but they can use those that are built on cryptocurrency.

In both cases cryptocurrency helps open up new markets where Fintechs can find consumers who may now be able to benefit from their products.

Cryptocurrency makes money transfer more efficient

One of the biggest complaints consumers have with traditional financial institutions is the excruciatingly slow pace of transaction approval caused by the multiple layers of bureaucracy such approvals usually entail. Anyone who has ever tried to transfer money from one bank to another across borders is no doubt acquainted with how tiresome the process can be. Even the process of transferring money between institutions in the same country is often riddled with delays and inefficiencies.

Because they are built on a secure, decentralized public ledger, cryptocurrencies can be moved back and forth much more quickly than traditional ones. This has the additional effect of greatly reducing transaction costs.

Speed, transparency, convenience -- these are cornerstones of Fintech innovation, and cryptocurrency is part of what makes it possible to build solutions based on those principles.

Cryptocurrency helps Fintechs reduce the prevalence of fraud

Even as disruptors Fintechs still face the same issues around fraud, identity theft, and money laundering as legacy financial institutions do. Thwarting such activity is challenging, time-consuming, and labor intensive.

Because cryptocurrencies are built on distributed, decentralized ledgers, their transaction records are easily verified. Given the secure nature of blockchain technology, these records cannot be manipulated or obscured, which makes fraud prevention a less costly and difficult enterprise for Fintechs.

Fintech innovation has been a significant disruptive force in the financial sector. Over the past decade, we’ve seen financial services and products change dramatically as Fintech solutions have offered consumers more appealing alternatives to traditional products.

In the decade to come cryptocurrency will play a role in shaping emerging Fintech innovation by unlocking new markets and supporting more efficiency and convenience in product offerings.