Cryptocurrencies will replace bank accounts, changing how Australians pay for things, according to Australia’s corporate regulator.
Within the next 10 years, Greg Medcraft, the chairman of the Australian Securities and Investments Commission, predicts that consumers could live without a bank account as cryptocurrencies replace them.
He also thinks in the next five to 10 years central banks around the world will be issuing their own cryptocurrencies. One of the banks he predicts will do this is the Reserve Bank of Australia. Consequently, as more banks consider digital alternatives they will force other banks to think about how they do business.
In an interview he said:
“The smart banks get it and are reshaping what they do, but they know they are probably living on borrowed time. With central-bank issued digital currencies, you might not need a bank account anymore.”
If central banks start issuing their own digital currencies, consumers will more than likely transact with them rather than a commercial bank. Or they could turn to a technology company. This then puts the onus on existing banks to reconsider their business models if they wish to survive.
“There will come a time when if you want to transact, you won’t need a private bank account because you will essentially have a digital wallet with the central bank.”
Banks Must Embrace FinTech to Stay Relevant
In June, Anthony Jenkins, the former CEO of Barclays, said that banks face the threat of becoming obsolete if they don’t embrace the fintech sector.
Speaking at a Money 20/20 Europe fintech conference in Copenhagen, Jenkins said:
“We’re really at the end of the beginning of what we see as a revolution driven by technology with financial services, and fintech is really a too narrow categorisation of what’s going on here. As the technologies develop and season, they’re going to create a totally different way of doing banking and financial services.”
According to Jenkins, if banks embraced the blockchain they could save between $80-110 billion. He has previously said that the fintech sector will disrupt traditional finance. In 2015, he claimed that within 10 years those employed within the banking sector would drop by as much as 20 percent. However, this could go as high as 50 percent.
Similar to his concerns in 2015, Jenkins reiterated his feelings back in June. Consequently, if banks wish to remain relevant they need to change how they do business.
“Banks can avoid [becoming irrelevant], but they have to act now, and what they really need to do is think about innovation, but also transformation, doing something radically different.”
Banks Invest in the Blockchain
In a bid to stay relevant banks are already making some changes. According to Robert Half Financial Services, 52 percent have invested in the blockchain. Those planning on introducing it is 30 percent while 14 percent may consider using it in the future.
Favourably, the findings found that 85 percent of financial services executives think that the blockchain will have a positive impact on the sector by 2022.
While work is still in progress with the blockchain, if it wasn’t worth investing in banks would simply ignore it. That, however, isn’t the case.
Will FinTech Disrupt Traditional Finance?
Interestingly, while many such as Medcraft are saying fintech will disrupt finance, the World Economic Forum (WEF) thinks otherwise.
In a report, it states that while fintechs have changed the arena for competitiveness, they aren’t producing that much impact on financial services.
Looking at the three main areas of competition for financial services, it looked at cloud computing, big data and artificial intelligence. WEF claim that Amazon, Facebook and Google have a thorough understanding of these compared to the finance sector. Thus, it is these companies that are becoming more disruptive to banks than fintechs.
Large-Scale Rollout of Two-Way Bitcoin ATMs in Australia
In light of Medcraft’s interview is the announcement that a partnership will take place between two fintech firms in Australia. Their aim is to update 2,900 existing ATMs, so that they can become two-way bitcoin ATMs.
According to a press release, a joint-venture will happen between ASX-listed blockchain startup DigitalX and ATM developer Stargroup. It adds that Stargroup has around 500 ATMs in Australia and manages another 2,400 ATMs through its subsidiary StarLink.
Presently, in Australia there are fewer than 20 ATMs that can undertake a bitcoin transaction. According to CoinRadarATM, there are 16 bitcoin ATMs in Australia. Not only that, but conversion fees vary between four to eight percent of the total value. Furthermore, most of these machines are only one-way, which means users can only purchase bitcoin and then add it to their wallet through the ATM.
With two-way bitcoin ATMs, users will be able to do the above. However, they will also have the option of converting their bitcoin to cash at the ATM. This provides greater flexibility and opens up more possibilities and wider adoption of the currency.
Leigh Travers, DigitalX’s CEO, said:
“With our growing success in blockchain consultancy services we view this opportunity as a suitable fit to offer ordinary Australians exposure to cryptocurrency. The success of this joint venture with Stargroup will add long-term revenue channels to our business and additional value to our shareholders.”
Todd Zani, Stargroup’s CEO and executive chairman, added:
“Stargroup is pleased to partner with DigitalX on this project and leverage its unique ownership of its ATM manufacturer to develop a two-way ATM where a bitcoin owner can not only buy bitcoin but more importantly can cash their bitcoin out. This development may also be able to be applied to other cryptocurrencies and be distributed internationally.”
The Rise of Cryptocurrencies
The use of cryptocurrencies such as bitcoin is rising. Japan is one country that is experiencing an influx in consumers using it to pay for everyday purchases. So much so, that by the end of 2017, it’s projected that there will be around 300,000 stores accepting it for payment.
As a result, it’s easy to see that the market will one day replace traditional bank accounts. Yet, this growing market still has a lot to do before it can claim that milestone.
Featured image from Shutterstock.