TradFi is short for “Traditional Finance,” which refers to the traditional banking and financial system. It encompasses the established financial institutions, such as banks, credit unions, insurance companies, and other regulated financial intermediaries.
TradFi is characterized by the use of centralized intermediaries, strict regulations, and well-established business practices. The system operates on trust and long-established relationships between financial institutions and their customers. TradFi institutions rely on legacy systems and have been slow to adopt new technologies.
The emergence of FinTech and decentralized finance (DeFi) has disrupted traditional finance, prompting some to refer to this newer industry as “Neo- or New Finance.” DeFi operates on blockchain technology, providing open access to financial services, and enabling users to control their assets without the need for intermediaries.