There has been talk of bank villainy since the Middle Ages. Banks are not our best friends, but they are a necessary evil. You could say the relationship is pretty toxic. Everyone recognizes its importance. At the same time, however, these companies do not enjoy the best reputations. Their infamy bottomed out during the 2008 crisis. There’s the idea that the bankers are vampires who are bleeding the system to death. Does the arrival of bitcoin mark the end of banking? Does the digitization process mean that big tech acts like banks?
Of course we also have big tech. Big tech have mixed associations. Innovation, intelligence, youth, progress. But also control, invasion of privacy, manipulation and totalitarianism. Initially, these companies were part of the countercultural movement. I mean the idea that some young people from their garage decided to use the power of technology to change the world. This â ???? Heroesâ ???? of Silicon Valley enjoyed public approval at times. But every hero becomes a villain at some point. Now, Big Tech doesn’t have the reputation it had in its early days. When they were little, they were the “underdogs” ???? and they had the sympathy of the people. But now they’re giants. Now they are the movie’s new villains.
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The Bitcoin utopia tells us that we no longer need intermediaries to conduct trades. I mean, the hegemony of the individual came. The idea is to be the sole owner and custodian of our money and to interact directly with others. In theory, that means the end of banking. However, The Bitcoin utopia sounds a lot like an informal economy where everyone keeps their money under their bed. What are the limits of such an economy? Well, on the one hand, we cannot enjoy the financial services of the banks. We don’t technically need banks, but their products and services are practically a necessity.
Suppose we decide to start a neighborhood organization and we need a mutual fund. Administrative functions are delegated to third parties and a fixed monthly payment is set for each neighbor. Neighbors choose to open a bank account for a variety of reasons. They can do everything with cash and use a safe for the common fund, but the best thing is a bank. Why? Well, first of all out of habit. In other words, it is what all neighborhood organizations do. And that’s always been done. Custom gives security. Let’s say it’s a matter of trust. It’s also a legal issue. And it’s also about the network effect. All parties involved have bank accounts, which makes interoperability easier.
Any deviation from normal practice would be an experiment. And experimenting in such a delicate area as neighborhood relationships is a great risk. More than one reader might think that the solution is a smart contract on the Ethereum network. Good luck making that statement on the neighborhood council! How can this smart contract be brought into line with the Neighborhood Organization Act? What if the contract is flawed?
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The Bitcoin utopia, a kind of cryptographic informal economy with the autonomous individual, has its obvious limits. The banks have the upper hand in hand-to-hand combat. The proof is the presence of the pseudo-banks that dominate the ecosystem: wallets, exchanges, etc. There are many intermediaries in this room. Why? Because users want to access your products and services. It’s that simple. The mattress is a very lonely place for money.
The main threat to banks does not come from the crypto world. It comes from big tech. The digitization process has enabled a proliferation of non-banks, neo-banks and non-traditional payment platforms. All the big names in the big tech industry have a great fintech project in their hands. Facebook, Amazon, Apple and Google invade the banking realm. If we look at the network effect of these giants, the threat is real.
The banks know all of this, of course. They know very well that they must adapt to the new times in order to survive. The future is digital. That is why all of the big banks have fintech projects. Many build their projects from scratch. And many have bought fintech startups. What we have is a merger. Big tech is entering the financial world. Banks are entering the world of technology. Big tech and finance are the most important sectors right now. Welcome to the fintech revolution!
Bitcoin and other cryptocurrencies are another link in the fintech revolution. I wouldn’t say Bitcoin came to fight the mighty to the death. Apparently, Bitcoin is an ally of the fintech revolution. Friend of banks and friend of big tech. In other words, the reality is far from a libertarian crypto revolution (as presented by the most radical Bitcoiners). However, we have made great strides in the fintech sector, driven by the world’s leading companies.
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Finally, we have to mention regulation as a very important element in all of this. Regulation can hold back many initiatives and encourage others. Here the banks are ahead of the technological ones. It is easier for a traditional bank to bring a digital product to market with the help of regulators than it is for a technology company to become a bank. At least in the eyes of politicians. Alliances are likely to emerge. Let’s say a neobank is set up and owned by banks and technology companies.
Above all, the user strives for convenience. When the product or service in question improves your life in any way, things like ideology take a back seat. The user wants to solve a problem. Who solves it? That doesn’t matter much. If the solution is decentralized, that’s fine. If the solution is centralized, that’s fine. Banks, crypto, big tech, or a combination of all three. The user tends to be pragmatic. If that thing works, it’s good. Brown, white or black. The color of the cat doesn’t matter. The important thing is that it catches mice.