Why bitcoin and other digital assets are growing? How can banks transform to thrive in the era of cryptocurrency?
With the rapid growth of cryptocurrency and its adoption by various countries, there is no doubt that it demands a continuous struggle to meet up to the markets’ competition. Cryptocurrency is in the continuous phase of changing the functionality of economic functions. Majority of the countries have fully welcomed the idea of cryptocurrency and allowed its usage in multiple dimensions. Public regard for the cryptocurrency is always climbing higher since the past few times.
All this discussion calls out for our banks (i.e., the core institutions of our economy) to evolve if they want to survive and thrive in the modern age of cryptocurrency as crypto has begun to take over the economy.
How does the growth of digital assets threatening banks?
Crypto might not seem like a threat to the financial institutions and banks on the surface level. However, the disruptive potential of cryptocurrencies to these institutions cannot be ignored.
Banks have been famous for the monopoly of financial transactions historically, and it restricts the user to take whole charge of their money directly. For instance, you cannot write a check or use a debit card without a checking account, nor you could commit a wire transfer and open a credit card.
Cryptocurrency has made all these transactions easier by the individual user himself. The integrated system of decentralization must be credited!
The luxury of using bank system forces the users to pay excessive fees (like overdraft fees). To keep your money safe, you have to one way or the other in the form of penalty for misusing system or regular monthly rate. However, the transactions can be unbelievably lower, and fees could be almost non-existent in the world of cryptocurrency.
Cryptocurrencies have won public trust after banks faced some severe trust issues since the 2008 financial crisis. Most of the consumers see banks and related people as broken, inherently greedy and some might consider it deceitful. The viable alternative of cryptocurrencies makes the consumer prevent themselves from trust issues as you can take total charge of your transactions.
In the world of bitcoin and other digital marketing assets, people find this economic transformation more reliable in terms of safekeeping their money. The ensured transaction legitimacy of digital assets provided security with cryptographic hashes has taken over the traditional methods of currency safekeeping in the banks.
Possible ways of banks to evolve
If banks want to evolve in the world of the digital marketing system, they have to make up for their inherent weaknesses and keep hold of their distinct advantages with some of these potential transformations:
The viable threat of cryptocurrency to the banks can be overcome by paying attention to it. Banks should take crypto development seriously and try to incorporate relevant changes related to it.
Banks should allow their customers to offer a personalized selection of products and one-on-one guidance services.
It’s not possible to compete with crypto in all areas. However, banks should focus on specializing in the areas that are not easy to be replaced by a transaction system based on crypto. This could be done either by serving business clients with analysis and underwriting or shutting down areas that are no longer profitable for them.
With the adoption of cryptocurrency worldwide, it is quite difficult and might be impossible for the bans to go completely obsolete. People are inclined towards adopting new ways of digital marketing to stay ahead of the competition and provide more flexible ways for their consumers.
However, banks have to take a few transformations to avoid the massive economic hit.
Editor of IMD News