Future of finance: the synthesis of traditional banking and crypto
By: Mindaugas Kelpša
Tags: Fintech, Future, Cryptocurrency, Blockchain, Banking

When thinking about the future, people usually tend to think in a binary way — either it will be good or awful. Or that some things will remain stagnant while other will experience huge changes. But the future is usually not like that — it’s usually a complex synthesis of the Old and the New.

The future of finance is probably not the most attractive topic in most parties, but it’s a topic that holds significant interest for us here at ORCA Alliance. We are all about bridging gaps — between the technology and the user, between traditional currencies and crypto, and especially between the now and the future.

How will the future turn out? No one can be sure, but we believe the connection between traditional banking and innovations coming out of the crypto world will be one of the main elements.

Connecting these two will be hard, but definitely worth the sparkles. A scene from “Back to the Future” (1985)

Tradition

Banks have been around since anyone can remember. In a way they seem ancient, coming from an age way before the Internet — so from a very long time ago. But, on the other hand, they seem timeless. Technologies advance, people change, but banks are always here and now, participating in our daily financial interactions. Sure, individual banks constantly fail, but the idea of having a bank doesn’t go away.

The reason for this is because banks are important — they help us manage our daily finances, save up for the future or issue much-needed loans. Banks are the most traditional way of managing personal finance and form an essential part of modern life. Currently, the importance of “being banked” (using a bank or a similar financial institution) is so high, that financial inclusion has been named as one of the key enablers of prosperity.

Banks as institutions probably won’t go away anytime soon — they are just too useful. But at the same time there are many new things up on the horizon that — as many foresee — have the potential to transform the practice of banking as we know it.

Innovation

“Innovation” is one of those words that seems to be everywhere these days. And with good reason — innovations, especially the digital ones, are at the core of our current economies. The financial services we use are constantly becoming more intelligent, efficient and user-friendly. And all these thanks to innovations moving us forward.

There are many technological advancements that are currently reshaping finance — Artificial Intelligence, Big Data, Open APIs, Blockchain or Peer-to-Peer (P2P) technologies, just to name a few. But arguably the most disruptive one of them all is Cryptocurrencies.

Cryptocurrencies hold immense potential to transform how financial services are done. From cheap, near instant transactions across borders to increased security, reliability and flexibility. At least for now the potential seems limitless. Even the International Monetary Fund — one of the world’s most important financial authorities — recently reaffirmed its positive attitude towards the concept of cryptocurrencies.

However, for the ordinary consumer cryptocurrencies are still far away from their regular lives. The learning curve is still too steep, the utility is too limited and the credibility might be too low. Many advances are still needed — especially those on the user side — for cryptocurrencies to ignite a truly disruptive change in our financial habits. But with the current rate of financial innovations, it looks like only a matter of time.

Photo by Olga Guryanova on Unsplash

Tension

The rapid growth of digital innovations over the past decade has created clearly observable tensions between traditional banking and the FinTech industry.

Innovations that build upon the existing banking infrastructure or work within the acceptable boundaries — like artificial intelligence or private blockchains — are usually eagerly accepted by the current financial establishment. And on the contrary — innovations that threaten the current paradigm are often times received with outright resistance. Up to this day many top officials from leading banks around the world express scepticism towards technologies such as cryptocurrencies, usually by focusing on the risks and downplaying the benefits.

Meanwhile, there are many startups that hold confrontational views towards traditional financial institutions. Ideals of disruption are ripe and aspirations of total financial market rearrangement are high. The recent booms in the cryptocurrency markets are fuelling these ambitions even further, stimulating a whole host of various financial service providers appearing almost every month.

In many ways this current tension between traditional banking and newly emerging technologies is a natural outcome of rising competitiveness and unease of operating in increasingly dynamic markets. But, as history has repeatedly shown us when tradition and innovation clashes often time it’s not one of them rising above, but a mixture of both — bits of something Old enhanced and transformed with elements of something New.

Synthesis

Why should there be a divide between traditional banking and the crypto world? There shouldn’t be one.

From the point of view of an ordinary customer, the current divide in the financial industry appears quite artificial. If you’re a customer, you usually don’t (and shouldn’t be expected to) care about the technical background of the service you are using. You just want services to be reliable, fast, cheap and easy-to-use — preferably all of the aforementioned at the same time.

Traditional banking and cryptocurrencies do not need to be at odds — the customer will always make the most suitable choice according to the particular situation. Paying for groceries with traditional currencies or crypto? Probably the traditional ones held in a bank account will do. Making an international transfer? Cryptocurrencies will probably perform better. Want to save up for an important purchase but don’t know which type of currencies would be best for that? Too complicated, let AI make a suggestion on what’s the most efficient way to do so.

The real power is at the hands of the customer, who can make or break both traditional banks or FinTech startups. And with competition growing, many cooperations and crossovers are to be expected to appease the ever-growing demand for convenience from customers.

Photo by John Towner on Unsplash

Future

So how will the future of finance look like? In many ways it will be similar to how it is now — banks will remain banks doing what banks usually do. The same with startups, constantly on the lookout for exciting technologies and new market opportunities. However, boundaries between the two will become increasingly blurred to a point where — for the ordinary customer — they will become irrelevant.

Seamless interaction between traditional banking and the crypto world — this is the future of finance. And that’s why achieving seamless interaction is on the top of the ORCA Alliance agenda. By connecting traditional bank accounts with cryptocurrency wallets and relevant service providers, ORCA will lay a bridge for easy crossovers between tradition and innovation, between the now and the future.