Important Highlights
- DeFi lending is rising fast, hitting $66.7B in total value locked, with major protocols like AAVE and Morpho leading the charge.
- Fintech firms are shifting to DeFi for better yields, fewer intermediaries, and improved global access.
- A 3-year adoption window is predicted, driven by regulation, user demand, and collapsing trust in centralized finance.
Fintech Firms Are Rethinking Traditional Lending
Fintech firms are approaching a major inflection point. Although traditional lending has long been their foundation, the rise of decentralized finance (DeFi) is changing the game.
Morpho, the second largest DeFi lending protocol, co-founder Merline Egalite, says the change is now mandatory.
Fintechs have recognized the strategic value of integrating DeFi. They will fall behind if they don’t.
Consequently, more fintech companies are exploring DeFi-based systems to stay competitive in an increasingly digital financial landscape.
Why Fintech Firms Are Shifting Toward DeFi
There are several compelling reasons for fintech firms to pivot toward DeFi.
First and foremost, DeFi offers better lending rates than traditional financial services.
These rates are made possible by removing middlemen and replacing them with smart contracts that are automatically executed.
In addition, the defi is permitted, which means that access is not controlled by centralized banks or institutions.
This not only improves efficiency, but also ensures that Fintech no longer needs to worry about losing access to API or banking license.
In addition, Aglite explained that DEFI enables fintech platforms to provide the best possible user experience an area where fintechs are fiercely competitive.
In addition, DEFI allows lending and borrowing activity globally, providing important financial access to users in areas with underbank.
Fintech Firms to Embrace DeFi Within 3 Years
The pace of DeFi adoption among fintech firms is accelerating.
According to Egalite, the majority of global fintech providers will incorporate DeFi lending into their operations within the next three years.
There are multiple reasons why this transition is inevitable:
- Traditional finance is losing trust. There has been mistrust of centralized financial structures since 2022 as a result of the failure of centralized lenders including Celsius, BlockFi, and Genesis.
- DeFi is recovering and growing fast. As of July 2025, DeFi lending hit an all-time high of $66.7 billion in total value locked (TVL), with AAVE leading at $31.7 billion and Morpho holding $5.5 billion.
- Regulations are evolving. If regulators allow compliant, yield-bearing DeFi products, even more fintech institutions will adopt this model.
As a result, Fintech companies are rethinking their infrastructure.
They are using code-powered, decentralized protocols that provide scalability and protection instead of relying on brittle centralized systems.
The Advantages of DeFi Integration for Fintech Companies
DEFIs have many advantages for fintech firms.
To begin with, DeFi offers significantly lower operational costs.
There is no need for multiple intermediaries or expensive compliance stacks.
Therefore, fintechs can pass these savings to their users in the form of better loan rates or higher returns.
Furthermore, DeFi protocols function globally without any time restrictions, providing services at all hours of the day.
This creates a new window of opportunity for fintechs in regions with no presence of or reliance on traditional banks.
In the meantime, DeFi’s dependence on code as opposed to human gatekeepers improves openness and lowers the chances of censorship, as well as financial de-platforming.
As Egalite put it:
“So are you hooked by large banks? In Defee, you are not afraid because there are no middlemen. You just trust the code itself.”
Therefore, fintechs can build apps with world-class UX on the front end while running DeFi protocols like Morpho or AAVE on the back end—a setup Egalite refers to as the “DeFi mullet.”
