Why Bitcoin Is Changing the Operations of Conventional Banks
Bitcoin and other decentralized currencies are changing how conventional banks work. And it’s time for financial systems to adopt cryptocurrencies if they want to remain relevant and competitive. Essentially, institutional investors and retail banking clients have shown increased interest in Bitcoin and other virtual monies. The distributed ledger technology and its potential have particularly captured the attention of investors and traders. Innovations like blockchain are not easy to ignore.
For this reason, some FinTechs, investors, and venture capital funds are committing to cryptocurrencies. That’s because they see cryptocurrencies as the future money. And banks can’t ignore this trend any longer and remain relevant. Although conventional banks have reasons to proceed cautiously, they need to alter their operations.
Today, people use platforms like YuanPay Group trading bot to access Bitcoin and other decentralized currencies. You can also use such apps to trade virtual currencies. Essentially, these platforms bring more competition in the banking sector. That’s because some people that used conventional banks and brokerage firms to convert currencies can now use such apps. Nevertheless, this decentralized currency is changing the operations of traditional banks for varied reasons. Here’s why Bitcoin is changing the functions of conventional banks.
Undressing Banks
FinTechs are stripping the conventional banks’ total services. Some aspects of the banks have become stand-alone products that customers get at a cost or scale that traditional banks can’t match. For instance, some FinTechs piggyback on the conventional transaction and payment solutions for fiat currencies. Additionally, they focus on improving customer experience, streamlining bank processes, boosting convenience, and making card payments better.
Some banks can’t manage customer experiences alone and have to move to the value chain’s bottom. Meanwhile, FinTechs threaten their market from the viewpoint of cryptocurrencies. That’s because they combine technology and finance while reinventing the financial system. And this leaves conventional banks no option but to alter their operations.
Exponential Growth
Bitcoin and other virtual currencies are undoubtedly a part of emerging technologies. Although some experts argue that Bitcoin needs between five and ten years to gain global acceptance, its’ popularity keeps growing. Currently, this virtual currency has an exponential growth curve. That’s why this cryptocurrency is on a path of becoming disruptive in the next few years.
What’s more, emerging digital technologies face challenges before growing exponentially. Some experts argue that Bitcoin will follow the 6Ds framework. That is, Digitized, Deceptive, Disruptive, Dematerializing, Demonetizing, and eventually Democratizing. Currently, this cryptocurrency is on the Deceptive path before becoming disruptive. The next phase is dematerializing, and the elimination of physical money and credit cards will characterize this stage. Eventually, this digital money will demonetize transaction costs and then eliminate middlemen like banks.
Finally, Bitcoin will un-bank banking by making currency and capital available to everybody with an internet connection. And this will mark the democratization stage. To cope with this process, banks have to change their operations to remain relevant.
Napster Moment
The Napster moment is when a new platform arises and disseminates the industry using a simplified experience at a lower cost and a scale that hinders other players from competing. Although institutions can try to preserve the problem they solve, their position becomes unsustainable after some time.
For instance, banks may no longer profit from transaction and money transfer costs. That’s because Bitcoin eliminates them when people use it to send and receive money. What’s people, people might eventually not need banks to keep and spend money. That’s because they will only need the internet and digital wallets to complete transactions online.
The Bottom Line
Some banks are yet to change since the emergency of Bitcoin. However, these institutions might undergo digital Darwinism. That means they have to adapt to this invention or die.
This article has been scheduled in accordance with Socialnomics’ disclosure policy.
