How will Blockchain impact the financial industry over the next 20 years?
I was asked this question on Quora — here is my response (slightly edited to ensure better flow)
The question should simply be how will it NOT affect the financial industry over not only the next 20 years but even the next 5- 10. Blockchain as a technology is an absolute game-changer.
Being the technology that underpins Bitcoin it is a total disrupter.
Consider the following, very simple example and you will see where the disruption happens:
- I am from the UK originally but live in Australia.
- To fund our business, http://Veredicutm.io — an anti-piracy and distribution platform for the film industry I draw on cash I have in the UK.
- It is QUICKER for me to fly to the Uk (24 hours in a plane — not pleasant…)
- Go to my bank
- Draw the cash out
- and fly back
than it is via the current banking system . This is because the banking infrastructure is outdated and based upon correspondent banking relationships as the image from my book (Down the Rabbit Hole) shows:
The banks also typically:
- charge around $50 for the privilege
- give an exchange rate around 2.5%-4% below market rate
In today’s time-poor, accepting world — this just doesn’t cut it any more
The blockchain enables this complete middle layer to be removed:
creating a new set of payment rails that mean :
- funds can be transferred and cleared in less than 60 minutes (as seen using bitcoin)
- the transaction fees can be cents
- (there are exchange rates in and out of bitcoin or other crytpocurrencies — c 1% — 1.5%)
This is just the beginning….
Blockchain removes the need for trust … relying instead upon cryptographic based technology to provide that source of truth. So ask yourself what is at the very heart of any banking- based system ? Turst.
Think of any service in the banks that require trust and that can be disintermediated.
Fintech and blockchain startups will eat away at the most profitable parts of the banks that will reduce banks to primarily storage (which they generally do well) and low value, commodity based lending.
In 20 years those banks that don’t adapt will die in the water but come what may we will tend to see profitability of the banks to reduce significantly, and may big names will disappear to be replaced by technology based banking.
Tim Lea
Author
