The banking sector should prepare for the tense battle.
When the crypto industry was in its infancy, only a few visionaries could see where it’s heading. Several years later, institutional investors joined the party, and suddenly what was once called a bubble became a trendy, promising technology. Governments came up with the idea of their digital currencies, and banks went on a mission to explore blockchain tech to improve their services.
Will banks eventually put cryptocurrencies to use, or will crypto platforms take over the banking industry instead?
What Crypto Brings to the Table
Before we start fantasizing about how the future of finance may look like, let’s review what cryptocurrency has to offer. The main problem with the current banking system is that it is utterly outdated. Cross-border money transfers are slow and complicated, and the cost of any transaction is way too high. On top of that, banking services are not universally accessible.
Cryptocurrency, in turn, can help solve all the issues from cutting down the costs, removing unnecessary intermediaries, and creating a more straightforward and highly functioning financial ecosystem. Another perk of crypto is transaction data transparency, which means better audit systems and account verification and increasing trust in general.
Bitcoin’s market cap has recently hit a historic $1 trillion mark as retail and institutional investors started taking crypto seriously. Thanks to growing adoption, financial authorities worldwide became more proactive when coming up with much-needed regulatory frameworks. Another good sign is that crypto use-cases rise above speculation: the overall value of BTC used for payments has grown as well.
Two relatively new types of cryptocurrencies, stablecoins and central bank digital currencies, have captured the attention of governments and financial institutions. A promise of a stable, regulated, yet highly efficient and safe digital asset based on the technology that can drive revenue and advance all the major financial processes is hard to resist. At first, monetary authorities were flirting with the idea of national stablecoins. Then CBDCs – a more centralized version of a stablecoin that doesn’t even have to be cryptocurrency but merely a digital currency – came along. Many countries are currently developing CBDCs hoping to offer faster, cheaper, and more secure transactions.
Apart from solving first-world problems, cryptocurrency has a huge potential of helping the less fortunate ones. Crypto can provide the unbanked population will quick access to banking just using a basic smartphone. With the help of blockchain tech, loans, remittances, and other financial products that used to be inaccessible or cost a fortune can become a reality for people living in rural areas of Asia and Africa. Whether it will replace the banking system whatsoever or work in tandem with it, crypto tech can undoubtedly help improve the quality of people’s lives.
Innovation Around the Corner
Thinking of potential crypto use-cases, especially those that can save lives and improve our daily routine, is rewarding. Imagine that Bitcoin price stabilizes and people start using it to pay for their gym memberships, takeaways, and streaming services. Does it sound good? How about sending $10,000 to your family on the other side of the world in seconds, paying a $1 fee? Strangely enough, in the world that is rapidly going digital and choosing mobile payment services over credit cards, these simple things are unavailable. Or are they?
When cooperating with existing cryptocurrency projects, the banking sector is taking it slow and not rushing to offer cryptocurrency-based products for their customers. However, they do make exceptions. Ripple is one famous example, and Mercuryo is working on being the next one. Banks using services like Fintech crypto SaaS by Mercuryo can offer their customers to buy cryptocurrency using their fiat accounts. What’s more important, the bank itself doesn’t need to deal with crypto at all as customers receive their coins via a third-party wallet that takes custody of crypto assets and confirms the balance info with the bank.
International money transfers can already be cheap and hassle-free. While banks, PayPal, Western Union, and other remittance dinosaurs will charge you a round sum and take up to several days to process your transaction, platforms like Mercuryo offer alternative solutions. Cryptocurrency-powered money transfers are nearly instant and affordable as the process narrows down to only two operations: fiat-to-crypto exchange when sending and crypto-to-fiat when receiving money.
Besides, who said you could not pay for groceries in crypto? Cryptocurrency cards that were made precisely for these purposes are getting popular. Mercuryo is to issue prepaid plastic or virtual cards that will be linked to a user’s crypto wallet and can be topped up with crypto of your choice. The card works no different from a regular debit card: Mercuryo will convert crypto to fiat and send it directly to the seller when you pay for things online.
Another major rising trend is crypto loans and yield generation. Today various platforms are already allowing their users to borrow as well as lend crypto assets. Depositing your digital assets to generate yield is becoming one of the most in-demand services in the DeFi space.
And those are only a few examples of cryptocurrency-related projects that solve the issues of the modern banking sector. Apart from that, blockchain solutions usually boast better user experience, advanced custody models, audit and reporting capabilities, state-of-the-art security, technology-first approach to risks and compliance. Traditional financial institutions have only one option: embrace progress and play along. Otherwise, they will become history.
The Bottom Line
Investors of all kinds are entering the crypto industry, and it’s only a matter of time before the missing pieces of the tech puzzle fall into place. The banking sector should prepare for the tense battle: building tech is one way to win it. Buying the existing solutions is another.
Banks will have to keep up with ever-changing regulatory requirements and adjust accordingly. Besides, they will have to keep up with all the innovative tech and handle all the new assets coming out at an accelerated pace. And if the banks do fail, there is no doubt that the crypto industry will quickly feel the gap.