Banking has certainly changed a lot in my short lifetime…
As a young child I followed my grandmother into the branch, watching as she filled in her passbook, waiting in line clutching her deposit slip and cash, to deliver her money to the teller. Clank, thump went the stamps in the passbook and deposit slip, the critical initials of the teller ratifying the deal. As the years passed, the lines shortened until it was only grandmothers that went to a branch. In time, the pens on the chains were replaced, as were the stamps. In a few short years so were the tellers. And in the blink of an eye the branches began to disappear altogether.
Such was the way of the banking world in the not too distant past. Technology forced banking online almost as soon as it was possible. Money now seems more digital than real, numbers on a screen rather than coins on the palm. How soon in the future will money be replaced by digital currency? The answer – the future came a few years ago already.
The critical element that facilitated this digital currency revolution was a method that finally gave digital currency the ability to behave like real currency, the blockchain. Much ink has been spilt explaining the blockchain and its distributed ledger, but at its core, it is the teller’s stamp, on steroids.
What is the future of banking? Well in a short period of nine years, it is expected that 10% of the world’s GDP will be stored on the blockchain. For all the talk of cryptocurrencies superseding institutional banks, there are many substantive reasons as to why cryptocurrencies will be at the forefront of the banking system.
A significant aspect driving banking towards cryptocurrencies is its higher quality verification system. The blockchain is light years ahead of the teller’s stamp and far more efficient than current electronic banking. Electronic banking today does have protections in place, but fraud is also rampant. As quant computers become a reality, the existing setup will be unable to protect capital. Banks have recognized this and are turning to the blockchain themselves for protection. As a further efficiency, the internal verification will remove the need for intermediaries which slow down the transfer and confirmation process.
It is this very protracted confirmation process that is the reason that transferring large sums of money overseas is frustratingly inefficient. Wire transfer, which sounds like it should have become obsolete along with telegraphed messages, is still being used because of the lack of strong authentication in place. Transfer by the blockchain expedites payments and settlement is quick and efficient.
Will the blockchain change banking as we know it and is the blockchain the future of banking? In short, these questions are moot is already permanently altering the banking industry. The only unknown, is to what extent traditional banking will change from what we know today into this new epoch?
Recommended for you