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Traditional Banking model turning obsolete, can Bitcoin and Blockchain turn it around? [Part 2]

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As discussed in the Part 1 of this article, the banking sector is designed with two major sources of income. Owing to the detrimental fiscal policies employed by central banks, these methods are slowly turning to be obsolete. This implies that traditional banking has to undergo a transformation that would shield it from negative effects of bad monetary policies. First let’s look into how banks have tried to shield themselves from the said threats. Then we can assess how Bitcoin and Blockchain can provide a viable solution.

Counter Strategies by the bank:

Due to the deteriorating conditions, banks had experienced a significant profit cut in their margins. So as to level the ground, banks have responded to profit pressure with cost cutting. Though this is not a positive strategy, it has helped many banks to weather the conditions in 2015. But in 2016, with increased number of countries in crisis, the cost cutting was hardly helpful.

Banks even resorted to restructuring to surmount these obstacles but that too in vain. Hence it was evident that with the traditional set up, there isn’t much lucrative for the customers. Even private investors in equity and forex markets have been facing their own set of problems which are effecting the investments.

How Bitcoin and Blockchain might help:

The most efficient way to increase customer base is to improvise over the existing services. That is exactly the kind of solution Blockchain offers. If the transactions are carried out in Bitcoin then it would further add to the beauty of this solution.

Bitcoin:

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One of the major ways in which Bitcoin can support banking would be through transactions. If all the customer related transactions are put on a framework that utilize Bitcoin, then banks can cut down on transaction charges that are generally undesirable. This way it would attract customers and would help banks in revolutionizing transaction speeds. First set of banks to take this step would come out as major market holders in the current scenario.

Blockchain:

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The ledger based technology has multitude of applications and the Fintech market is already trying to capitalize on it. Banking can be revolutionized through Blockchain as this would bring speed and ease to the traditional set up. With the help of Blockchain many standing problems like cross border payments can be done at ease and lightning pace. Apart from payments, settlements pertaining to credit card market, which is the backbone of the credit structuring system for modern day banks can be revolutionized.

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