Deutsche Bank: Bank accounts could disappear in as soon as 5 years
Banks are waking up to the enhanced competition from blockchain tech that's moving into their sector.
Deutsche Bank senior executive Marcus Schenck described a recent trip to China as "eye opening," at Bloomberg's European Capital Markets Forum, reports Business Insider (BI) UK.
"There's a thesis that at some stage in 5, 10, 15, 20 years — who knows — accounts will disappear, and be replaced," he said. "That would be a game changer to what we're doing."
The eye-opening experience he described was a visit to a company manufacturing microchips "that are used for bitcoin mining, or any type of blockchain technology."
"Schenck's argument concerns the creation of individual wallets for cryptocurrencies — whereby people are able to store their money digitally but without the need for a third party like a bank," reports BI.
Many industry insiders have predicted that banks will be faced with reality shock as some of their core retail customer services, such as money transfers and storage, go elsewhere. This shift has already begun, with international payment providers and tech disruptors bringing in plans to implement blockchain payment solutions in 2018.
One of the most significant elements of this disruption might be the expansion of financial solutions beyond the strict confines of the financial services industry. Some individuals might welcome the ability to transfer monetary value beyond the confines of established banking infrastructure, but an enterprising tech startup might be just as enthusiastic and see it as a chance to seize markets from banks by making a more competitive offer.
For example, IBMs Universal Payment Solution is being pushed out with the aggressive goal of handling a significant proportion of cross-border transactions. It's being presented as a solution for banks as well as for businesses that want a more cost-effective money transfer solution. If a tech company can present a more cost-effective solution than the bank, there's no reason not to use it.
Jesse Lund, blockchain head at IBM was recently asked what would happen to banks if digital currencies and tech companies take over the payments business.
"I think banks will start to refocus on what they were invented for – safeguarding deposits, paying a decent low risk rate of return, and making loans from those deposits thereby creating credit to stimulate economic growth," Lund replied. "Charging fees simply to intermediate payments is lame."
Blockchain technology stands to disrupt other areas that have traditionally fallen under the umbrella of banking by necessity, and in which banks have faced no real competition outside their own industry. Banks stand to lose business to external competitors in the areas of lending, investing and simply storing money securely. And as individuals start taking a DIY approach to some of these, banks also face a shrinking market in other ways.
"Technology is impacting the different businesses we are operating in in different ways," Schenck said, noting that in retail banking "there is a completely new normal evolving."
"The vast majority of activities are going down the path of being a more electronic interaction with your client. We have that in our trading business, in FX. The vast majority today, there are no human beings involved when we do business."
Disclosure: At the time of writing, the author holds ETH, IOTA, ICX, VEN, XLM, BTC and NANO.
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