Financial systems should start using cryptocurrencies if they want to remain relevant and competitive. Institutional investors and private banking clients have already shown increased interest in Bitcoin and other virtual currencies.
Blockchain technology and its potential have especially caught the attention of investors and traders. Such innovations cannot be ignored. Today, FinTech companies, investors, and public funds are getting involved in cryptocurrencies. They see cryptocurrencies as the money of the future. Banks should take note of this trend.
People who used traditional banks and brokerage firms for currency conversions can now use applications. However, decentralized currency is changing the way traditional banks operate for many reasons. Let's explore why Bitcoin is altering the functions of traditional banks.
Some aspects of banking have turned into separate products that customers can obtain at a price or scale that traditional banks cannot compete with. FinTech companies combine traditional transactional and payment solutions for fiat currencies. They focus on improving customer service, optimizing banking processes, enhancing convenience, and improving the quality of card payments.
Some banks cannot handle the customer experience independently, so they have to move to the end of the value chain. FinTech technologies now threaten the market in terms of cryptocurrencies. The reason is that they combine technology and finance, effectively reinventing the financial system. The only way out for a bank is to change its business.
Experts believe that Bitcoin will take from five to ten years to establish itself in the world. Its popularity is steadily growing. Today, this virtual currency has an exponential growth curve. Therefore, in the next few years, Bitcoin will become revolutionary.
New digital technologies also face problems before they start growing exponentially. Experts claim that Bitcoin will follow the concept of 6D. This means digitization, deception, disruption, dematerialization, demonetization, and democratization.
Currently, this cryptocurrency is in the deceptive phase. The next stage is dematerialization, which will mark the abandonment of physical money and credit cards. Digital money will demonetize transactional costs and then eliminate intermediaries (banks).
This is the moment when a new platform emerges and expands the industry with a simplified interface at a lower price and on such a scale that other players cannot compete. While institutions may try to maintain the solved problem, eventually, their position becomes unsustainable.
For example, banks can no longer profit from transaction costs and money transfers. Bitcoin eliminates them when people use it to send and receive money.
At some point, people will no longer need banks to store and spend money. All they need is the Internet and digital wallets to conduct transactions online.