According to Cointelegraph, financial technology companies are increasingly exploring decentralized finance (DeFi) lending protocols as an alternative to traditional lending services. DeFi offers users the ability to lend and borrow cryptocurrency in a permissionless manner through smart contracts, bypassing numerous financial intermediaries. This shift is driven by the growing efficiency and accessibility of DeFi lending, which may prompt more fintech companies to adopt these protocols over centralized alternatives.
Merline Egalite, co-founder of Morpho, the second-largest decentralized lending protocol, highlighted the strategic importance of integrating DeFi during an exclusive interview at EthCC 2025. Egalite emphasized that fintechs are recognizing the competitive advantage DeFi offers in terms of user experience and product offerings. He noted that DeFi adoption can enable financial institutions to provide superior financial products for lending and trading, potentially inspiring a significant portion of global fintech firms to transition to DeFi within the next three years.
Morpho, with a total value locked (TVL) of over $5.5 billion across 20 blockchains, ranks behind AAVE, which leads the industry with a $31 billion TVL. DeFi lending protocols present a crucial financial lifeline for individuals lacking access to traditional banking infrastructure, thanks to their permissionless nature that circumvents traditional banking restrictions. Egalite pointed out that fintech firms using traditional banking systems risk losing their licenses or API access, whereas DeFi eliminates intermediaries, relying solely on the trust in the code.
The advantages of DeFi's permissionless nature are increasingly recognized by fintech firms, and regulated yield-bearing products may further encourage financial institutions to explore DeFi lending. Recent data from DefiLlama indicates that DeFi lending reached a new cumulative all-time high of $66.7 billion in TVL, with AAVE's protocol accounting for 47% of the total DeFi lending value and Morpho contributing over 8.2%. This marks a significant recovery for crypto lending, which faced challenges starting in 2022 when several centralized finance lenders filed for bankruptcy amid declining crypto valuations.