Anyone with even a passing interest in the finance world will know that digital banks and cryptocurrencies rank among the hottest topics around. Both reflect the fact that a significant number of consumers feel that it is time to explore options beyond traditional banks and currencies, which, to some, have stagnated in recent years.
The banking industry has had mixed fortunes as the internet has entered the mainstream. Big names can often be relied upon to be at the forefront of digital security. Given that their data is among the most valuable targets for nefarious actors, it makes perfect sense to take steps to keep it as secure as possible. However, there remains room for improvement in adopting new payment methods and rapidly expanding features.
The Rise of Digital Banks
These shortcomings are not always the fault of the banks themselves. The banking system in the US has not changed all that much in decades behind the scenes. A reliance on archaic technologies has meant that even innovators in the space may face unforeseen challenges in bringing their online and mobile experiences up to date.
Digital banks in the US are in the privileged position of coming into the market from the ground up without the hundreds of years of tradition and outdated tech of their established competitors. As a disruptive industry in their own right, even potential customers that prefer cryptocurrencies as a way to escape traditional banking take an interest.
With faster feature rollouts, more dynamic support, and banking features that were unheard of even ten years ago, these digital banks could conceivably grow into a significant contributor within the crypto ecosystem.
Initial Cryptocurrency Implementations
Some commentators believe that the same blockchain technology that underpins cryptocurrencies will eventually play a more significant part in the banking of the future. With how fast technologies and features improve compared to the days before widespread internet adoption, this is a realistic possibility.
For the time being, however, many digital banks have sought to explore the impact of cryptocurrencies in a more linear manner. Cash App, one of the biggest beneficiaries of the US digital banking revolution to date, enables customers to invest in stocks and cryptocurrencies through the app itself.
Ally Bank is also considered particularly crypto-friendly, allowing customers to purchase various currencies using their credit and debit cards before storing them within their accounts. Ally Bank also integrates with Coinbase, widely considered among the most significant obstacles between banks of any kind and domination of the crypto industry.
Critically in this growth phase, an increasing number of digital banks enable users to make payments in currencies that extend far beyond the typical fiat options.
The Future of Crypto and Banking
One area of particular interest to digital banks is the speed and security of international payments. With as many new features and opportunities made possible by these new types of banks, there remains a reliance on traditional infrastructure. Disruptive banks seek out speed, functionality, and usability, but the process of sending money from one account to another will not change overnight.
While even established banks have caught up with the concept of instant transfers between accounts, for the most part, one area in which new challengers have found success is within the international market. With an increasing number of remote employees and the economy being more global today than ever before, the demand for fast, low-cost international payments sits at an all-time high.
Blockchains and cryptocurrencies care little for a user’s physical location. The cost of confirming a transaction is the same when paying a neighbor as transferring money to someone on the other side of the planet.
The Challenge of Mass Appeal
Banking is an industry that relies on collaboration. Some might remember a time when the type of card and issuing bank determined which ATMs were available for withdrawals. For cryptocurrencies to reach their potential in banking, mainstream adoption could be the key.
They are already a part of the mainstream financial consciousness to an extent. The wild swings to which Bitcoin is susceptible regularly reach widely-viewed news outlets. However, awareness and adoption are two different things. Not all digital banks are betting on the importance of crypto, but they at least have the agility to adapt as customer requirements evolve.
Early adopters already have the opportunity to combine their everyday bank account with crypto functionality. The stubbornness of those who view cryptocurrencies as an opportunity to escape the traditional banking culture will play a part in how the story unfolds. Nevertheless, a convergence between day-to-day banking and blockchain-powered alternatives is well underway. Whether it becomes inevitable will become more apparent as new digital banks and currencies enter the market.