Topic: [2016-01-25]Banks are worryingly complacent about the coming digital currency (Read 313 times)

The financial services industry is dangerously complacent in its approach to digital money. Some of the major banks almost look like they fear technological change that promises greater transparency, efficiency and security at a lower cost.

Too many industry players and regulators have spent more time shutting down innovations than driving them. Barclays, Chase, Westpac and the Bank of Ireland are among the many global banks to have refused business or closed the accounts of cryptocurrency pioneers, when they should have been learning from them.

Cryptocurrencies like bitcoin cannot be dismissed as the preserve of those engaged in suspicious transactions on the dark web. It’s not only radical libertarians and goldbug-like speculators who are taking cryptocurrencies seriously. Some banks, governments, startups and academics are beginning to pay attention, albeit sluggishly.

The blockchain technology that underpins cryptocurrencies is simply a faster, cheaper, more reliable way to handle money electronically. Distributed ledgers – the open and networked basis for proving ownership and transfers of such currencies – dramatically shorten the time it takes to clear transactions, wherever they take place in the world.

If the banks don’t lead this digital disruption, someone else will.

A generation ago, Sony was peerless in the music industry. Its hi-fi, Walkman and record label divisions were churning out hit after hit. But when the online revolution came, Sony played it safe. It put up barriers, only seeing threats rather than opportunities from MP3 and related technologies. Apple ate Sony’s lunch.

Cryptocurrencies and fintech, like online music, will not go away. The successful financial services firms may be those that overcome the current culture of complacency and show the will to disrupt themselves. Apple did just this when it saw that mobile phones could integrate the same features as its wildly successful iPod range. It cannibalised its own market, before anyone else could. The iPhone ultimately killed the iPod, but became even more profitable.

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