according to materials from the website - By Cointelegraph
Financial technology (fintech) companies may abandon traditional lending services as decentralized alternatives offer more accessible loans with lower fees.
Decentralized finance (DeFi) protocols allow users to lend and borrow cryptocurrency for passive income without the need for permission, using smart contracts instead of numerous financial intermediaries.
According to Merlin Egalite, co-founder of Morpho, the second-largest decentralized lending protocol, the growing efficiency and accessibility of DeFi lending protocols could inspire more fintech companies to prefer them over centralized lending options.
In an exclusive interview at the EthCC 2025 conference, he stated:
"Fintech companies have realized that integrating DeFi is a strategic move. If they don't do it, they will fall behind others, as fintech companies compete in terms of user experience and the product they offer to users." "Fintech companies understand that DeFi can provide a higher rate," Egalite explained, adding that implementing DeFi could help financial institutions "offer better financial products" in terms of lending and trading.
This will inspire the lion's share of global fintech companies to switch to DeFi within the next three years, he added.
Morpho is the second-largest lending protocol in the crypto industry with a total value locked (TVL) of over $5.5 billion across 20 blockchains, trailing AAVE, the industry leader with a TVL of $31 billion, according to DefiLlama data.
DeFi loans could become an important financial lifeline for people around the world who do not have access to traditional banking infrastructure.
More fintech companies are realizing the benefits of DeFi's openness, which eliminates the need for financial intermediaries and the centralized risks associated with the lending and borrowing process.
Fintech companies using traditional banking rails still risk losing their license or access to APIs, Egalite stated, adding:
"So, are you attracted to large banks? In DeFi, that’s not scary because there are no intermediaries. You just trust the code itself."
Although fintech companies are already aware of these advantages, regulated yield products may inspire even more financial institutions to explore DeFi lending in the future, Egalite added.
According to DefiLlama data, the total value of DeFi lending reached a new cumulative historical high of $66.7 billion in TVL on Friday.
Currently, the TVL of the AAVE protocol at $31.7 billion accounts for 47% of the total DeFi lending volume, while Morpho's is $5.5 billion, which is over 8.2%.
This marked a significant recovery in the crypto lending market, which began to decline in 2022 when centralized finance (CeFi) lenders Genesis, Celsius Network, BlockFi, and Voyager declared bankruptcy over a two-year period due to the decline in cryptocurrency values.
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