Image Source: bitbond.com
As we all aware, every economy has its financial system and runs on individual policies and procedures. The major financial institutions are banks and stock exchanges. Initially, they appear to be dominant players and undisruptable institutions in the finance industry.
But this scenario has changed due to the invention of cryptocurrency and blockchain technology. Traditional finances systems such as banks and stock exchanges are losing their faith due to many disabilities. The cryptocurrency and the blockchain industry are acting fast enough to replace the traditional finance system.
Why traditional finance is broken and unsecured
The best word to describe the traditional finance system is “Inefficiency.” Even Though, It is enabling the services to exchange trillions of dollars over the world, providing employment to millions of people and serving the billions of customers around the world. However, the banking system has highly unreliable and broken chain system.
Non-flexibility and the very long process for a single transaction are the main reasons for Inefficiency. According to PWS analysis, 45% of the financial intermediaries are suffering from the cyber attacks every year and it causing huge loses to these institutions. The ultimate burden of losses passed on to final customers in the form of commissions and charges for using their services.
Whatever the reason might be the complexity and non-flexibility of modern financial system results in leaving the customers in unsatisfied and deprived state.
The new patterns for banks
Even though the banks are suffering from their poor procedures and policies, still they have time and space to overcome these inefficiencies to step up. They need to realize and improve certain things which are essential to survive in the competitive world.
Transaction costs should be lower
The first and foremost disadvantage is that banks are charging higher fees and ongoing contributions to the third parties. We can observe this situation in cross-border transactions, where the customer wishes to send money from one country to the party in another one. The main reasons behind the high charges are bank commission and the currency exchange charges between the nations due to nature of payment systems.
In some cases, you can experience the transaction passing through 6 different phases, in which each stage you incur additional fees and time delays.
“Blockchain technologies helps in minimizing the transactional costs between the countries and increase the delivery speed.”
Blockchain will free up a significant amount of financial assets of the world. According to World Bank statistics, 5% reduction in cross-border charges will save $16 billion per year.
To address all transactional cost related, one new Crypto startup has emerged which is Monetha, launched in January 2017. This Ethereum – based payment system works on makes transactions much more accessible and fast. For instance, if a person wants to settle the payment to another guy who is another country, it will cost five times less and 10,000 times faster than the traditional banking system.
Money transferring charges needs to be more transparent
Cryptocurrency development is providing accessibility to a lot of people, who are not dealing with the traditional baking system. It is helping the customers to use the digital money to pay for the goods and services. It will be improving them by lowering the costs of their purchasing and money transfers.
For instance, TenX enables their customers to spend the money by using the mobile app, and they can convert the Cryptocurrency into Fiat money. Another project called SpectroCoin which is producing debit cards of bitcoin which will help the people to use this card to purchase millions of stores worldwide and also allows to withdraw fiat money from 30 million ATMs.
Digital transactions are vital today
Due to technological advancements, customers are using to digital transactions. Now everywhere we can find the acceptance of digital purchases from the retailers also. Studies show that 40% of the American people want to use digital transactions instead of visiting the bank. So customers prefer digital currency instead of banks. It means they can also use digital cryptocurrency which is more convenient, less expensive and more transparent.
Not only banks but stock exchanges
In a traditional financial system, not only banks but the stock exchange markets are also facing failed organized system. Conventional stock markets seem to be working to feed the stockbrokers instead of its actual investors by charging high brokerage fees and commissions. Trading with stock exchanges is costly.
But the best part is that wall street disruptive technologies can rectify these problems. A team is already working to make the trading useful at a very least cost.
Today’s stock exchanges are working toward the growth of investment banks, stocks and for the future of stock intermediaries. But the new service called Celsius allows you to invest in cryptocurrencies and also it acts in favor of investor at a low cost and high transparency. Celsius network is going to solve the wall street inefficiencies.
Ethereum based P2P lending and borrowing process may relocate the traditional stock exchanges. Like CME & CBOT, the holders of the coin will earn the returns. By allowing trading in cryptocurrencies will helps in gaining the maximum profits by the investor instead of intermediaries.
The stock exchanges are losing charisma in investment fields because of the invention of useful and cost-free technologies. The specter eliminates these intermediaries to create a better trading platform for investments.
Now we can easily predict that the entire future transactions are going to digitalized, and the customers also very smart enough to analyze the market, and they will choose the best products and services in the market. Now it is evident that Cryptocurrencies and the blockchain will change the future of finance industry. Even though the big financial institutions having substantial capital and best infrastructure they need to improve their operating system to sustain in the long term.