The cover-up marks a radical change in how banks now see the enfant terrible of currencies. According to Benjamin Lawsky, superintendent of New York’s Department of Financial Services, the cryptocurrency created “a virtual Wild West for narco-traffickers and other criminals.” Even Nobel Prize-winning Op-Ed columnist Paul Krugman asked himself in one of his weekly columns for the New York Times if Bitcoin isn’t just “evil“.
Bussman believes that blockchain technology has the potential to trigger “massive” simplification of banking processes and cost structure. The downside of this development is that banks loose their ability to manage customer experiences by themselves. Bottom up FinTechs meanwhile are threatening the market from a cryptocurrencies-point of view. It’s a completely new network protocol that allows value to be exchanged without the need of a trusted intermediary. In the near future transferring money and property will be as easy as swiping your finger from left to right. Banks are now extremely worried that they are facing their own Napster moment – the point when the rise of a new platform disseminates a complete industry by offering a simplified experience in a cheaper way and at a scale that makes it impossible to compete with. Just remember how Napster and it’s descendants?—?like Spotify and Netflix?—?have changed the entertainment industry in just a few years. In July 2014 advisory firm Gartner added cryptocurrencies for the first time to their hype cycle of emerging technologies. Peter Diamandis, cofounder of the Singularity University and coauthor of the books ‘Abundance’ (2013) and the recent ‘Bold’ (2015), doesn’t agree with this timeframe. In the beginning digital technologies follow a linear path before suddenly growing exponentially. The cryptocurrency is now on a path from deceptive to disruptive and it will threaten the entire financial industry as we know it. Finally the last stage will be about banking the unbanked?—?capital and currency will become available to anyone with a connection to the internet (democratizing).


Banks haven’t changed very much since their invention, thanks to Bitcoin they’re now dragged into the 21st century. By (quietly) recruiting new employees with knowledge in bitcoin, they are finally accepting the disruptive power of cryptocurrencies. Margins are under pressure, customers are more informed and more demanding, and innovations like peer-to-peer lending are bypassing the banking industry altogether. The challenge for the banks is to exploit the potential of digital to develop deeper relationships with their customers, and to use the wealth of data available to them to offer far more targeted and personalised services.
One of the requirements was an, “opinion on bitcoin and other cryptocurrencies.” The bank has since deleted the remark, but the Wall Street Journal managed to write about it before JPMorgan could delete it.
In the beginning of September 2014 the Bank of England published a report that describes the blockchain?—?the distributed ledger of Bitcoin?—?as a, “significant innovation’ that has ‘far-reaching implications”. He added: “When somebody with a strong brand and security level establishes it as a reliable service, then the whole industry will follow. Top-down there are FinTechs that piggy back on the traditional payments and transaction solutions for fiat currencies.
They not only bring finance and technology together, but also reinvent the entire financial system. It’s beyond information on your fingertips, it’s exchanging value on steroids (without the need of a trusted party). Recent research shows that global investment in FinTech is set to double from $10 billion in 2014 to $19.7 billion in 2015. In the report they positioned the digital currency between the peak of inflated expectations and the trough of disillusionment. In his view Bitcoin’s growth is best explained by an exponential curve and that’s why it is on a path to become disruptive over the next 1–3 years.
In the next stages of his model Bitcoin is eliminating (dematerializing) the use of physical money and even credit cards, then it demonetizes the cost of transactions and consequentley will eliminate the need for middlemen (banks, lawyers, exchanges).


The excesses that led to the financial crisis, the burden of greater regulation and the steady stream of revelations about illegal or unethical behaviour have all but obliterated customer trust. New entrants to the market are offering payments services online, unhampered by the baggage borne by the banks, whether that’s under-invested IT systems or customer scepticism.
Digital makes it possible to tap into completely new sources of value, both for the bank and its customers.
Indeed, there is probably no other industry where the need is so great – or the opportunity so significant – to put the customer at the heart of the business. Alan Greenspan, the former president of the Federal Reserve, was baffled by the digital currency: “You have to really stretch your imagination to infer what the intrinsic value of Bitcoin is. Parts of the bank are turned into stand-alone products that are delivered to the consumer at a scale and cost that no traditional bank can match.
And now, the digital revolution is fundamentally challenging the financial services business model.
In some cases this might require new strategic partnerships with other players, though banks in general have traditionally been wary of taking such an approach in case it dilutes the relationships with their customers. In fact, many of these consumers choose their bank solely on the basis of the quality of its online and mobile offering, and associated benefits like text updates.
In some respects they’re right: research shows that consumers are far more likely to buy additional services from their primary banking provider, though there is now a greater willingness to switch providers than there has been in the past.
It’s now all the more imperative that these services are efficient, easy-to-use, and absolutely secure.



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