Financial technology (fintech) firms may soon shift away from traditional lending models as decentralized alternatives offer easier access to loans and lower fees.
Decentralized finance (DeFi) lending protocols allow users to lend and borrow cryptocurrencies in a permissionless way, using smart contracts rather than relying on multiple financial intermediaries. This enables users to earn passive income with greater transparency and fewer barriers.
According to Merline Egalite, co-founder of Morpho—the second-largest decentralized lending protocol—the rising efficiency and accessibility of DeFi platforms could prompt more fintech companies to adopt them over centralized lending systems.
In an exclusive interview at EthCC 2025, he stated:
“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.”
“Fintech companies are beginning to see that DeFi can offer more competitive rates,” explained Egalite, noting that adopting DeFi could enable financial institutions to deliver superior lending and trading products.
He added that this growing realization is likely to drive the majority of fintech firms worldwide to transition to DeFi over the next three years.
Morpho ranks as the crypto industry’s second-largest lending protocol, with over $5.5 billion in total value locked (TVL) across 20 blockchains, according to DefiLlama. It trails only AAVE, which leads the sector with a TVL of $31 billion.
DeFi lending offers a vital financial alternative for individuals worldwide who lack access to traditional banking systems. An increasing number of fintech firms are recognizing the benefits of DeFi’s permissionless design, which eliminates the need for intermediaries and reduces centralized risks in the lending and borrowing process.
Fintechs relying on traditional banking infrastructure still face potential risks, such as losing their licenses or API access, Egalite noted, 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.”
Although fintech firms are already aware of DeFi’s benefits, the introduction of regulated yield-bearing products could further encourage more financial institutions to explore decentralized lending, Egalite added.
Decentralized finance (DeFi) lending reached a new cumulative all-time high of $66.7 billion in total value locked (TVL) on Friday, according to data from DefiLlama.
The AAVE protocol leads the sector with $31.7 billion in TVL, representing 47% of the total DeFi lending market. Morpho follows with $5.5 billion, accounting for over 8.2%.
This surge marks a strong recovery for the crypto lending space, which had suffered a downturn beginning in 2022, when several centralized finance (CeFi) lenders—including Genesis, Celsius Network, BlockFi, and Voyager—filed for bankruptcy amid falling crypto valuations.
