Virtual currencies have taken on a worldwide fascination since the hype of Bitcoin’s success last year, rising roughly 500 percent to a peak of more than $20,000 per coin. Moreover, the rise of blockchain technology and fintech companies has changed the way consumers do things that many of the traditional financial systems have failed to keep up. Thus, banks and financial organizations can no longer ignore the crypto craze and the threat of losing their core purpose. With digital startups evolving and large corporation hedging their bets on crypto and blockchain technology, will banks and financial industries survive digital disruption? The answer all depends on how they respond.
The growth of cryptocurrencies and blockchain technology has brought a varied response from financial industries across the globe from welcoming adoption to strict bans. Over the past couple of years, very few in the finance industry grasped the underlying benefits of blockchain technology for value transfer, and their initial response was Bitcoin had no inherent value, a scam, or just a passing fad. Today, some banks call for ICO regulation and demand strict compliance as the launch of token sale threatens them in terms of payment transfers, consumer accounts, and investing power. On a positive note, other financial institutions respond by seizing on opportunities to tap on blockchain technology to fit into their future strategies. Furthermore, an increasing number of banks have grown eager to create investment products around cryptocurrencies in favor of the new tech.
Collaboration, Not Competition
Since banks and major finance industries don’t have the reach to serve all the communities in need, the people who are the victims of financial exclusion are starting to make a clear choice to get better access to financial services through blockchain technology and cryptocurrencies. What’s more, young generations are gravitating towards new payment paradigm that offers convenience, cheaper cost, and more personalized experience. Thus, the success of crypto industries has got these financial institutions all so worried without realizing that these changes could prove to be an advantage.
Finance industries can establish new partnerships with the right fintech company to enable them to strategically align their business, stay relevant in this digital sophistication, and work on mutual goals. This collaboration is necessary to enable both parties to gain a competitive advantage and scale up their businesses to improve efficiencies as well as customer experience. For instance, fintech and crypto companies can integrate a blockchain-settlement system with a compliant KYC and AML dataset that offers an added layer of service for faster transactions, improved security and data quality, real-time updating, transparency, and cross-channel capabilities. In return, the finance industry can reduce reliance on paper-based verification in favor of digital financial system, support fiat and cryptocurrency trades, help in customer acquisitions, and facilitate trust from governments and other institutions.
The pace of change in the financial sector and the noise about fintechs and cryptocurrency space are only accelerating. Given the situation, the financial industry has the choice to dismiss the noise entirely, panic, or choose to look at this evolution as an opportunity rather than a threat and build real grounds for collaboration instead of competition. The advent of cutting-edge technologies requires banks and finance industries to radically transform and look beyond their old practices to keep up with those changes. Simplification, digitization, and streamlining opportunities are necessary in order to reposition their business models and culture to meet the growing demands of an increasing digitally focused customer base. Thus, the financial industry must innovate and disrupt themselves with the right technology or risk getting left behind.