A digital force awakens


When it comes to providing means of storing, sending and receiving money for goods and services, banks and their affiliated institutions, have enjoyed a monopoly for centuries. They (especially central banks which allegedly are owned a powerful family) have the authority to influence countries and their governments – we will not go into the level of control as it can pave the way for conspiracy theories which though not proven – are not farfetched.

So, it’s only expected that when some new and unknown entity threatens the prosperity and thriving of the so-called stable and regulated financial system, they start to react.

How banks are responding is evident by the fervent building of their own internal blockchains, which defeats the purpose of a having decentralized currency system. Bitcoin and the cryptocurrencies get their appeal not just because they are very secure an (not easy to hack or intercept) or that criminals can use them with little to no traceability, but because unlike fiat money, they are not heavily regulated and can be mathematically restricted. The 21 million limit/cap of Bitcoin by default places it closer to the status of gold) which is not infinite) – but what will happen when all are mined?

The current ‘value’, which is now over $9000 could move up again according to the traditional laws of supply and demand as it becomes rare. To unlock more value the creators might look to split it again as the split that gave rise to Litecoin and Ethereum – which are also currency racing to newer heights daily.

120x600Now back to the banks – they make money from deposits placed by the public that is matched up by their local reserve banks. The reserve banks borrow them money which they essentially just print and the banks must ‘turn it’ and pay it back, after enjoying their sizable profits of course. So, technically we ‘empower’ them by depositing our money so they can invest the funds in all sorts of mechanisms such as into credit and loan to individuals and businesses, equities, property and even worse, high-risk investment vehicles like currency trading, derivatives (futures). Banks are the essentially the biggest regulated and legal Ponzi-schemes.

Then they also make a significant amount of the fees they charge.

Let’s quickly put things into context. A bank with over a million customers transacting daily, charging each a 10 cents (VERY conservative figure) transaction fee for depositing, withdrawing from another bank, intra-bank transfer, will make 10 x 1 000 000 = 100 000 units of the currency on the day. This equates to 1,2 million Euros, Dollars, Rands, or Yen annually! This is just off transactional fees. Then there are the monthly service cost fees – a much higher amount that is guaranteed to the bank and dutifully payable by the customer to keep their account open.

This is what the cryptocurrencies can potentially wipe away from them if it is heavily adopted – granted the means to acquire and use Cryptocurrencies is not easy nor as straightforward as receiving paper money or having to a few push buttons to move your funds via traditional Internet banking for the average person. That, coupled with the stigma around ‘Cryptos’, means there is still a barrier to entry for that ‘open-source’ monetary system – for now.

So, while banks will bring about their own blockchains to address security concerns around making transactions, for them, it would still be business as usual when it comes to the charges.N26_banner-300x250-EN

Some newer financial institutions, however, are already progressing in the favour of their clients – one such is the European based N26 Bank. This relatively new and currently limited to Europeans for now (and mostly Euro-based transactions), allows for (little-to-no charge) transactions to be made and monitored over mobile and desktop apps and often leads to one paying for things all month without even going to an ATM – it runs somewhat like a bank but allows the (smart) card to be used as a credit card (backed by Mastercard) would. This allows one to quickly purchase goods online, book events, flights ticket, and accommodation – the things you still can’t do with debit cards.

There are other digital developments in what is now called Fintech, heavily used in central Europe, US and Asia. In countries like Sweden and Estonia, the card and digital system have been a thing for a long time now. Some are adopting or partnering with the cryptos to help deliver their services such as the relationship between a German bank and the crypto Ripple.

Get Ripple easily here

It would be interesting to see what global governments and financial institutions do to ‘protect’ their systems or how they adapt to the new digital era upon us.


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