The Financial Express
By Mohammed Roshan
As the world shifts to a digital-first approach to finance, neobanks and crypto are giving traditional financial institutions a run for their money by meeting customer expectations better.
While it is unlikely that traditional forms of finance and currency are abandoned anytime soon, banks and traditional financial institutions will have to embrace technology and go the digital route to keep their relevance intact. The future is crypto.
To adapt to this massive paradigm shift, these financial institutions must first and foremost embrace new financial technology. This is an inflection point for banks — legacy and digital — either, integrate crypto to survive, or face the consequences and fade away into oblivion.
While the price of Bitcoin and other crypto assets may have plummeted recently, there is strong growth of investors who are able to look into these assets beyond the price, understand it’s potential, and realize how digital assets like Bitcoin can act both as a peer-to-peer (P2P) medium of exchange and as a store of value for a rapidly developing decentralized economy.
But it’s not a game of winner takes or all – crypto and fiat must and can co-exist, atleast in the near future. Without international coordination and some common standard operating procedures, the financial system could face a significant currency exchange problem.
Building a bridge to crypto
Enterprises can embrace new technologies that can revamp legacy systems and successfully integrate crypto by executing blockchain-transformation projects.
As banks modernize their tech stacks with crypto integration, this will ultimately help in profitability and help them evolve better. An example for this would be how neobanks could use distributed ledgers to take care of transaction processing and reconciliation.
We are yet to see this in India, but it would be truly game-changing if established payment platforms are able to offer users the option to transfer crypto as one of the money transfer options along with fiat.
Rising customer demand for crypto
As crypto adoption grows worldwide, users are demanding for seamless ways to access crypto. A vast majority of newcomers into the crypto space would find it more trustworthy to buy crypto from financial institutions they are already a part of and trust, rather than having to go to a third-party exchange or wallet.
By integrating crypto solutions, neobanks can easily solve for this and it also helps them stay competitive in this digital-first world.
Banks have many possibilities and business use cases to choose from as they enter this market – they could act as an exchange, as a custodian for users’ crypto or provide other crypto-based services.
As mobile and contactless payments grow, and fiat loses its shine, crypto is no longer just a fad.
The future is here, and it is hinting at the development of a more inclusive digital payment infrastructure – especially as countries around the world are becoming privy to cross-border transactions, quicker remittances, and a more compassionate space that doesn’t need to rely on traditional banking systems.
The real uncertainty lies not in the risk but in missing opportunities. While regulation remains hazy, banks and other traditional financial institutions might not be willing to take the leap into crypto. In India, the RBI vehemently opposes crypto and has regularly issued warnings advising investors not to go into crypto.
Hence, several important questions remain. Will banks continue to see crypto as a threat? Even if they don’t, will banks be able to offer the innovation that their customers expect? Will they be able to successfully integrate these new technologies into their existing operations?
There is no playbook for this, but the financial enterprises that are first to design and implement a viable approach will lead the industry.
The next few years will more than likely bring crypto and blockchain technology into the mainstream. Innovation in financial services is just beginning and only an indication of crypto’s transformative potential for all of humanity.
The author is co-founder and CEO, GoSats
Also Read: FTX’s doom will lead to DEX/DeFi boom
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