Banks Could Lose Over US$ 150 Billion If They Don't Adopt Digital Currency
Bain & Company interviewed more than 50 professionals (bankers, equity funds, IT specialists, executives from international payment associations and startup CEOs) to understand the implications of the technology distributed ledgers for the banks. Based on the answers, it was possible to conclude that financial institutions still do not have the necessary training to use this resource – also known as digital currency – in international payment methods.
The consultancy's study showed that, in theory, banks can deal with the changes generated by the emergence of distributed ledgers, but in practice, the scenario is more challenging. This is because, due to industry regulations and other barriers, digital currency startups were unable to compete with financial institutions and ended up partnering with them. However, most financial institutions chose not to develop this tool, due to the volatility, governance and scalability requirement of the technology, in addition to the need to deal with privacy issues related to the dissemination of information on money flows.
In addition, the lack of clarity regarding the “pathway” of digital currencies poses a problem for cross-border payments and financing where distributed ledger technology performs the most.
The analysis by Bain & Company underscores that banks recognize the potential of this feature to improve the transparency, speed and efficiency of payments, but as the current structure offers the stability of annually carrying out transactions totaling US$ 300 trillion in revenues, institutions prefer not to risk .
But the consultancy points out that, despite the banks' resistance, there is evidence that companies are overcoming technical challenges to keep up with the market. The wave of investments in digital currencies gives clear signs that payment channels are attracting interest, and new competitors have changed customer expectations. Therefore, the time is right for all banks to adopt this new digital tool.
Behind distributed ledgers technology
Distributed ledgers technology solutions eliminate intermediaries, enable direct transactions between international banks and accelerate the time they are carried out. In addition, they allow each financial institution involved to have an overview of their clients' accounts and balances, a key element of automatic payment tracking and notification tools. Not to mention that they also significantly reduce the costs arising from error rates and other values of the corresponding banking networks.
Another operation that also benefits from this resource is financing, which, although representing a smaller percentage of the revenue (approximately US$ 23 billion) of correspondent international banking networks, supports broad relationship transactions. Through distributed ledger technology, it is possible to achieve the improvement of commercial offers of capitalization of this service even in advanced stages.
The consultancy's study showed that, in theory, banks can deal with the changes generated by the emergence of distributed ledgers, but in practice, the scenario is more challenging. This is because, due to industry regulations and other barriers, digital currency startups were unable to compete with financial institutions and ended up partnering with them. However, most financial institutions chose not to develop this tool, due to the volatility, governance and scalability requirement of the technology, in addition to the need to deal with privacy issues related to the dissemination of information on money flows.
In addition, the lack of clarity regarding the “pathway” of digital currencies poses a problem for cross-border payments and financing where distributed ledger technology performs the most.
The analysis by Bain & Company underscores that banks recognize the potential of this feature to improve the transparency, speed and efficiency of payments, but as the current structure offers the stability of annually carrying out transactions totaling US$ 300 trillion in revenues, institutions prefer not to risk .
But the consultancy points out that, despite the banks' resistance, there is evidence that companies are overcoming technical challenges to keep up with the market. The wave of investments in digital currencies gives clear signs that payment channels are attracting interest, and new competitors have changed customer expectations. Therefore, the time is right for all banks to adopt this new digital tool.
Behind distributed ledgers technology
Distributed ledgers technology solutions eliminate intermediaries, enable direct transactions between international banks and accelerate the time they are carried out. In addition, they allow each financial institution involved to have an overview of their clients' accounts and balances, a key element of automatic payment tracking and notification tools. Not to mention that they also significantly reduce the costs arising from error rates and other values of the corresponding banking networks.
Another operation that also benefits from this resource is financing, which, although representing a smaller percentage of the revenue (approximately US$ 23 billion) of correspondent international banking networks, supports broad relationship transactions. Through distributed ledger technology, it is possible to achieve the improvement of commercial offers of capitalization of this service even in advanced stages.
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