Financial technology (Fintech) companies may move away from traditional lending services, as decentralized alternatives offer more accessible loans with smaller fees.
Decentralized finance (DeFi) lending protocols enable users to lend and borrow their cryptocurrency for passive income in a permissionless manner, via smart contracts instead of numerous financial intermediaries.
The growing efficiency and accessibility of DeFi lending protocols may inspire more fintech companies to opt for them over centralized lending alternatives, according to Merline Egalite, co-founder of Morpho, the second-largest decentralized lending protocol.
He told Cointelegraph during an exclusive interview at EthCC 2025:
“Fintechs have realized that integrating DeFi is a strategic move. If they don’t do it, they will lag behind others because fintechs are competing on the UX and the product they give to users.”
“Fintechs are realizing that DeFi can provide a higher rate,” explained Egalite, adding that DeFi adoption can help financial institutions “provide the best financial products,” in terms of lending and trading.
This will inspire the lion’s share of global fintech firms to migrate to DeFi within the next three years, he added.
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Morpho is the crypto industry’s second-largest lending protocol, worth over $5.5 billion in total value locked (TVL) across 20 blockchains, behind AAVE’s industry-leading $31 billion TVL, DefiLlama data shows.
DeFi loans can present an important financial lifeline for global citizens without access to traditional banking infrastructure.
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DeFi’s permissionless nature helps bypass traditional banking restrictions
Increasingly more fintech firms are recognizing the advantages of DeFi’s permissionless nature, which removes financial intermediaries and centralized risks involved in the lending and borrowing process.
Fintech using traditional banking rails still risk losing their license or Application Programming Interface (API) access, Egalite said, adding:
“So are you hooked by large banks? In DeFi, you don’t fear that because there are no intermediaries. You just trust the code itself.”
While fintech firms already recognize these advantages, regulated yield-bearing products may inspire even more financial institutions to explore DeFi lending in the future, added Egalite.
DeFi lending rose to a new cumulative all-time high of $66.7 billion in TVL on Friday, according to DefiLlama data.
AAVE protocol’s $31.7 billion TVL currently accounts for 47% of the total DeFi lending value, while Morpho’s $5.5 billion accounts for over 8.2%.
This marked a significant recovery for crypto lending, which saw a decline starting in 2022 when centralized finance (CeFi) lenders Genesis, Celsius Network, BlockFi and Voyager filed for bankruptcy within two years as crypto valuations fell.
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