To date, technology has improved the banking industry with the development of digital transactions. Cryptocurrency is a whole new game emerging worldwide to compete in this evolving trend. A new financial channel with easy and transparent payments, the demanding use of virtual money, or cryptocurrency is now fascinating all.
But what about the existing systems? Traditional banks and current fiat currencies are certainly the first to experience a massive blow as virtual money is even overpowering their digital development. Let’s break down the possible impacts and changes in the banking industry as virtual money dominates society.
What are the immediate changes?
Cryptocurrency emerged no more than a decade ago with its first variant, the Bitcoin of 2009. As of 2021, more than 300 million active crypto users are using more than 60 variants of cryptocurrency that came up in no time. This development is witnessing global changes like:
Customers are choosing digital channels rapidly
The customers who used to depend on traditional bank transfers and physical accounts are now shifting towards virtual payments. Even the growing trading apps like the famous Poocoin for Binance coins or any Poocoin alternative for other cryptos provide various features to help with easy transactions.
As it facilitates remote transactions with quick procedures, more and more people are now opting for them. Banks have faced a dip in their customers and revenue as big traders and foreign transactions now rely on decentralized crypto.
Increased demand for digital resources in traditional banks
As virtual transfers excite people with easy procedures, many now demand the physical banks to upgrade their systems. Rather than using printed books, checks, or visiting physical branches for money transfers, people now want apps and digital platforms for every aspect. Unknowingly, the banking industry has stepped into digitization as the demand increased.
Increased globalization and economic standards
Cryptocurrency increased the rate of foreign exchanges and even prompted many global merchants set up in distant lands. With the development of businesses and the country’s economic condition, the overall financial sector witnessed a boost.
The banking systems are also getting globalized to support the diversified culture of the business. Traditional banking systems have slowly stepped into the global banking system, expanding the coverage with the international flow of the country’s finances.
Current challenges for the existing banking systems
The digital currency has promised several advantages and a great revolution in the banking sector. However, this brings a huge challenge to the current system, which struggles to keep pace with the emerging developments. The traditional banks now face the challenge of generating:
A uniform currency for all
Cryptocurrency doesn’t belong to any country as fiat currencies do. It is the main reason why multinational businesses and travellers are chasing them. Banks now intend to develop global exchanging systems to facilitate the wire transfers from one country to another after proper conversion.
Decentralized governance in transactions
Blockchain is the sole record holder for crypto transactions. Unlike banks that govern the whole procedure and don’t allow any suspicious transfers, virtual transfers have no obstructions in any. The decentralized nature of virtual money competes with the bank’s central governance, which juggles the people’s decisions to choose the reliable.
Procedures and legalities
There are effectively no or very few legalities in virtual money transfers. Since banks involve the identification of both parties, proper account registrations, and several rules to grant permission, people prefer the crypto mode instead of the fiat currency. The more the banks implement stages in payment procedures, the more people demand short transferring applications.
No transaction fees
The stark difference between the physical bank and virtual blockchain is the charged transfer fee. As there are no governing bodies, cryptocurrency channels have merely less or no transaction fees at all. Comparatively, banks with high transferring fees, especially for foreign transfers, are affecting globalization thus overall financial income. Crypto, in this case, scored well to boost globalization.
Demand for flexible upper credit limits
Since banks don’t issue virtual money, the users have the complete freedom to mint them using blockchain technology. Then probably there’s no limit on how much one can earn and spend.
Physical banks follow a tradition of setting maximum sum to access and credit amounts depending on the customer’s credit score or the regional bank’s policies. These factors are currently getting challenged as many customers demand flexibility in their credit amount and access to spend their savings.
Possible threats faced by the changing banking industry
Virtual cryptocurrency or even digital platforms certainly pose a fair number of cyber threats along with the advantages they have. Apart from the so-common hacking and phishing frauds, the introduction of free and decentralized crypto brings forth the following threats the banking industry has to cope with.
Uncontrolled mining of cryptocurrency
To date, the traditional banks follow the strict principles of granting money based on a maximum threshold to regulate the entire amount between all their customers, either rich or those with low income.
Crypto defies this scenario and provides the chance to earn money if anyone is capable of cracking the blockchain codes. It might create chaos all around as no one governs the total money in a country, and people with zero computer knowledge would be left behind.
Fraud transactions leading to scams
The whole process of crypto transactions doesn’t have any stage to check the details and valid identification of both ends, making it more prone to duping scams. The paying party might never know who they are dealing with if the receiver has created a fake account to launder tons of money. Blockchain being the only record holder to show the proof of transaction leaves the victims devoid of anyone to ask for help.
The banking industry can certainly flourish with the developing virtual currency as it brings a lot of ease in the transactions and promotes global trade. Since there are a few challenges in developing the existing systems or overcoming the threats of the new introduction, a rigid set of rules and proper administration are also required to achieve great results.