There are some serious problems and limitations with the current banking system, and those flaws became all too apparent during the last housing crisis. Issues that had been covered up and swept under the rug for decades were brought to the surface, and the results were truly devastating.
The housing market may have largely recovered, but the flaws with the banking infrastructure remain. Those concerns have been expressed by regulators, politicians – and millions of banking customers. Among the deficiencies banking customers face are:
- High fees, including a mind-boggling number of nuisance charges that steal money right from customers’ accounts
- A highly centralized infrastructure – if there is a problem with one part of the banking system, everything else can be impacted
- Perceived (and actual) elitism – Many banking customers simply feel that they are not appreciated and that the bank feels their small accounts are not worth the time and effort
- Expensive and time-consuming international transfers – If you have ever tried to transfer money between borders, you will appreciate the enormous difficulty, and there has to be a better way
- An outdated system – The current banking system has been around for more than a century, and it has not changed much in all that time
- Incompatible currencies – Simply calculating exchange rates between nations can be a real challenge, especially for the average banking customer
Given the limitations, and downright deficiencies, of the current banking system, it is surprising that nothing has sprung up to take its place. Just about everyone recognizes that there needs to be a better way, and that may be starting to happen.
The digitization of monetary storage and payments is already underway, made possible by cryptocurrencies and its underlying blockchain technology. Virtual currencies like Ethereum and Bitcoin have been game changing many arenas, and their influence is only expected to grow in the coming years.
Compared to the outdated, expensive and largely antiquated banking system, digital payment and storage systems have a number of built-in advantages, including:
- A decentralized approach – Blockchain technology allows payments and the digital storage of value to be totally decentralized, creating a better and safer approach
- Little to no fees for transactions – The unique nature of cryptocurrencies and digital payments allows for sharply reduced fees, and in some cases no fees at all
- Worldwide use and acceptance – Digital payments can be made and digital currency can change hands regardless of borders and currency differences
- More than just a store of value – Cryptocurrencies can be more than just a store of value; utility-enabled currencies can be used for a variety of purposes
- Liberating the poor and disenfranchised – Compared to the closed and costly banking system, cryptocurrencies have a democratizing effect. Billions of men and women who are currently locked out of the banking system will be able to access these digital forms of payment and money storage.
- Enabling technology – Digital payments allow technology to work for people, not against them. Digital codes are embedded in the systems that utilize blockchain technology, making real-time detection of fraudulent activity possible.
- No more human error. Human error has been a huge problem with the legacy banking system, but digital payments and blockchain technology could all but eradicate it.