Retail banking is undergoing something of a revolution. Taking advantage of the fact that traditional banks haven’t changed much over the years, so-called challenger banks and payment firms are starting to capture market share from the younger generation. Although most big banks offer online portals, these are often based on legacy technologies that make them slow and cumbersome to use.
In contrast, the challenger banks and related payment firms adopt a digital-first approach that appeals to millennials and generation Z. These up-and-coming fintech firms are able to develop new platforms, predominantly targeted at mobile users, that are simple to use and streamlined.
In this way, companies can keep technology overheads low while also avoiding the cost of maintaining bricks-and-mortar premises. They can serve millions of users from a single location with a relatively small team, quickly able to adapt to user demands.
A Global Phenomenon
The UK proved to be fertile ground for this phenomenon to take root, but it’s now rapidly expanding across the globe. In 2017, British-based Monzo and rival firm Atom Bank raised $120m and $140m in funding, respectively. Now, similar offerings are popping up in Germany with Solaris Bank and N26, in Brazil with Banco Original, and in China with MyBank and WeBank.
However, the UK fintech shift shows no signs of slowing. Revolut recently made the news when it announced it was seeking $1.5 billion in growth funding.
A New Suite of Digital Finance Services
Clunky legacy technology alone isn’t likely to be the only factor driving the younger generation towards the challengers and payment firms, so what makes these companies different? Another key driver for change is that they tend to hone on niche services that traditional banks have overlooked. For example, pre-paid credit cards for traveling mean that users can avoid paying foreign exchange fees.
They may also offer higher rates on savings than the traditional banks, or the ability to send instant payments to other users. Lower cost, on-demand services such as travel insurance are also alluring for a generation looking for more flexibility from their providers.
Given the focus on digital, it’s perhaps unsurprising that the challengers have now started to differentiate themselves from the traditional banks in another way – embracing cryptocurrencies. This is an intriguing development for the nascent crypto sector, as these companies have a massive user base, bringing Bitcoin and its cousins in front of a new audience of potential adopters.
Digital Banking Frontrunners in Cryptocurrency
Perhaps unsurprisingly given that many challengers originated in the UK, the first movers into the crypto space are also UK-based firms. In contrast, it could be that Brits have more ways to buy bitcoin in the UK, which is why local fintech firms have decided to focus on it.
Either way, one example of a fintech firm adopting cryptocurrency is UK-based payment firm Skrill, which started offering users the option to buy digital assets using their fiat deposits back in 2018. More recently, Skrill has added crypto-to-crypto buy-and-sell services to its platform. Users can swap their Bitcoins for up to eight other cryptocurrencies, including Litecoin, Bitcoin Cash, and EOS, among others.
Skrill has a user base of 20 million people, who can now more easily access crypto and play around with a portfolio using their existing account balances. One of the critical barriers to mainstream adoption is the fact that users need to navigate cryptocurrency exchanges, which have a poor reputation for security following several high-profile hacks. A crypto service through a trusted provider like Skrill is a major key to overcoming that barrier.
Skrill doesn’t necessarily fit into the category of new fintech firms. The company started life as Moneybookers back in 2001 and is now operated by the Paysafe Group. Paysafe also owns Neteller, another payment firm that’s expanded into cryptocurrency services.
Revolut is another example. The company has been steadily expanding its platform based around pre-paid debit cards, savings vaults, and overseas medical insurance. Like Skrill, it also offers users the opportunity to purchase crypto through its platform. If it manages to raise the $1.5 bn funding it’s currently seeking, then Revolut could also be a critical catalyst in bringing crypto to the masses.
Trailblazing a Crypto-Finance Revolution?
Others seem set to follow. German bank N26 has previously indicated it intends to integrate crypto trading into its app. Starling Bank doesn’t currently accept crypto but stated in a Twitter thread last year that it acknowledges cryptocurrency is becoming more mainstream.
Hi Josh! At the moment our cards and accounts do not support Coinbase, nor Crypto Currencies. 😀
— Starling Bank (@StarlingBank) July 28, 2018
The co-founder of Starling Bank also recently joined Gemini as Managing Director for Europe, which may perhaps help to build a bridge between Starling Bank and the crypto space.
Although many of the other challengers have yet to leap into crypto, there was one surprising entrant from the traditional banks reported in November. The Royal Bank of Canada (RBC) recently filed four patents in the US and Canada that indicate an intent to incorporate cryptocurrencies into its offerings.
If the RBC can blaze a trail for traditional banks in crypto adoption, the challengers holding back in this regard may have to up their game. However, given that the pace of change in the traditional retail banking sector tends to be somewhat glacial, the more agile challengers are more likely to have a better chance of providing a bridge to crypto for new users.
Although crypto still caters to a niche audience, it seems likely that challenger banks and payment companies could ultimately play a very critical role in bringing crypto to the masses. The question is when, rather than if, they’ll follow in the footsteps of the early adopters.
Brian Wang is a Futurist Thought Leader and a popular Science blogger with 1 million readers per month. His blog Nextbigfuture.com is ranked #1 Science News Blog. It covers many disruptive technology and trends including Space, Robotics, Artificial Intelligence, Medicine, Anti-aging Biotechnology, and Nanotechnology.
Known for identifying cutting edge technologies, he is currently a Co-Founder of a startup and fundraiser for high potential early-stage companies. He is the Head of Research for Allocations for deep technology investments and an Angel Investor at Space Angels.
A frequent speaker at corporations, he has been a TEDx speaker, a Singularity University speaker and guest at numerous interviews for radio and podcasts. He is open to public speaking and advising engagements.
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There is a very big difference between the ledger and the bitcoin itself. The bitcoin is just a number. A unique number with special qualities, but just a number nevertheless. These numbers are now extremely large multi-digit numbers, and the larger they get, the more storage they take. Eventually, one will need a gigabyte just to store one number. Bitcoins are a commodity, like gold, that are valuable simply because the demand is greater than the supply. But they are NOT a currency. Completely impractical as a currency. Ten million dollars for the lowest denomination of the currency? You have got to be joking. What would you buy for ten million dollars? You can not sub-divide a bitcoin. The only advantage of a bitcoin is in the uniqueness of the number. You can not make smaller numbers out of it. You can offer shares in that bitcoin, but that is now useless in preventing any fraudulent activity. The shares are no longer encrypted with public/private keys.
Bitcoins are a pyramid scheme, based on nothing but vapor. Nothing tangible behind them, nothing physical. When the pyramid collapses, everyone loses. Last one out gets nothing. All of the special numbers simply become public domain. There are no intellectual property rights on a number.
But even the block chain gets unmanageable in size. The bigger it gets, the more unwieldy, and the more prone to abuse. Like Rapunzel’s hair, it becomes too long to be manageable without magic. Data corruption will become inevitable.
The cost of producing the new bitcoins it what makes the whole thing work. The more money that is spent mining increases the height and thickness of the virtual wall of electric power and hashing hardware that protects the ledger from tampering. As more people adopt the bitcoin currency the greater the existential and social risk to society of a successful attack of the network and so it is necessary that the mining difficulty (hardware investment and power consumption) keep pace with the number of lives that could be ruined if the system failed.
Your observation that bitcoins will be too expensive to mine doesn’t take into account the necessary increase in value of bitcoin as demand increases and the necessity for its subdivision into smaller and smaller units when it must be shared by more and more people. So the cost of minting the bitcoin used by its owner will always be the same in dollar terms or in terms of what it can buy. It may cost $100,000 to mine 1 bitcoin but if bitcoin is worth $10,000,000 the cost of producing it will be 1% which won’t be noticeable.
PoW, PoR, PoS, PoP, BiM, BaM reads like an old Batman comic during the ‘fight scenes’. Alphabet soup. Word salad.
I do not doubt that the concept of block chain technology, basically creating a back-up by recording an ongoing stream of every change as it is made, instead of snapshots of each finished product, has a lot of merit. The ‘backup’ if needed of the final product is thus ‘produced’ by recreating every single step, procedure, and method that was part of the original process. Sort of like a key logger – if every keystroke is recorded, it could recreate a back-up copy of a document. A truly ‘brute force’ backup method.
But AI will always remain, well, artificial. There is a reason why it is called ARTIFICIAL intelligence. It is not REAL intelligence. The best it will ever be, is SIMULATED intelligence. It will not ever come close to real intelligence, as long as it stays digital. Real intelligence is and always will be analogue.
But any currency that will ever be enduringly successful HAS to have one quality – the first ‘coin’ and the gadzillionth coin have to be able to be produced and processed at the same cost.
But one good thing about it, no one can put a patent or any intellectual property rights on a number. The ‘tokens’ (specialized numbers with unique properties), once ‘mined’, can always be used for other purposes. Just like any other sequence, the Fibonacci sequence for instance, they will eventually just become a curiosity for grade school children.
Hybrid tech that employs elements of PoW, PoS, PoR, and ‘shards’ down to the individual user is the future. Check out SingularityNET White Paper, Ocean Protocol, and NuNET 😉
Cryptocurrency is essentially a venture with a terminal illness. Essentially, it is based on diminishing returns.
Imagine a paper currency where the first bill printed costs, well, a dime, but every succeeding bill costs double to print. Eventually, it will cost exorbitant amounts to print each new bill, and to keep the money supply expanding. It becomes just too cost prohibitive to keep going.
Already some but farms are using all the energy of a small country, just to produce a few more ‘bitcoins’. These farmers have to be paid, and so the costs of each new bitcoin keep escalating. Any fool can see the inevitable end.
If they can manage to popularise it quickly enough that it becomes mainstream before practical quantum computers destroy RSA and ECC, then I guess there is a chance that someone will look for an asymmetric PQ crypto with small enough keys to build a proper Blockchain out of it…
In that case, having many children would reduce their individual burden – a comeback of proletariat. Better to die childless.
None of these innovations changes the fact that the current younger generation is the most indebted ever and that their debt will probably be lifelong, or even passed to the next generation when they die in a sort of neo-Serfdom.