In 2017, Harvard Business Review predicted blockchains will have the same effect on the financial industry as the internet had on the media. That’s a bold statement and one which is proving more probable each day.
Twenty years ago, most major media companies ignored the internet. Later, they scoffed at it, seeing it as a passing fad. Then some fought with it. And then they either started using it or disappeared. For many- if not most- media companies, the internet is now central to their business.
Banks are going through a similar process with blockchains. For years, they ignored (or didn’t know about it), then many dismissed it. Now banks are scrambling to incorporate blockchains into their services.
Banks are using (or could use) blockchains for:
- Clearing transactions
- Transferring funds
- Releasing their own digital currencies
- Customer verification
- Managing loans and more.
A few of these options are still just ideas. But many are under development by banks or by startups working with them.
The World Economic Forum predicted the tipping point will come in 2027 when 10% of the global GDP will be on blockchains. Increased inclusion for developing countries, new types of tradable assets, and frictionless record keeping are among the benefits they foresee.
The internet made the media transparent, cheap, accessible and personalised. Could blockchains do the same for banking?
The benefits of combining cryptocurrencies with financial services are tremendous.
Blockchains could provide financial services to more people, reduce fees and prevent crime.
Did you know that financial fraud costs us £190 billion per year in the UK alone? Cryptocurrencies can help minimise typical forms of fraud. Identity theft is, for example, a serious problem. In 2016, almost 500 people fell victim each day. Identity theft is devastating for anyone affected.
Banks spend billions verifying and authorising transactions. On average, each company spends $60 million on KYC alone each year, with some spending as much as $500 million. Blockchain technology would reduce both the cost and the amount of paperwork involved. No one likes paperwork and certain verification processes still require a fax machine.
In the same way that the internet enables anyone to start their own media company, cryptocurrencies have lowered the bar of entry to the financial industry. Yes, that means there will be a lot of bad ideas and failed attempts. It also means people who wouldn’t have been able to actualise their ideas before can contribute. As we’ve seen with online media, inclusivity transforms incumbent industries.
The internet began as a tool for military use and became infinitely more. Blockchains are likewise spreading far beyond currency towards travel, law, record keeping, identification, transport and more. But banking is the area where it currently holds the most promise.
Pretty soon, Wirex will be ready with our crypto-friendly banking platform, bringing together the financial services you need and the benefits of blockchain technology.