Digital Currency and Banking 2.0

In our earlier blog, we had explored the various uses of blockchain as a ‘relational database’.  We shall explore a specific use case in this blog – Banking 2.0

Banking 2.0 is a new concept promoted by Brett King.  He talks about how consumer behaviour is the seed for innovation for banks.  He talks about how innovations like mobile wallets, payment gateways and mobile banking have made the branches redundant.  The banks have to go where the customer is. If the customer moves, so does the bank.  Transactions between individuals can happen through mobiles, he points out, by each phone touching each other.  One becomes the Point of Sale, and another becomes the payment gateway.

But what caught our attention, is the fact that people are not governed by the ‘laws of the bank anymore’. Social media has built ‘trust groups’ through communities.  These trust groups are very important that many transactions – financial, in particular, will happen within groups.  Whatsapp, Facebook, Tumblr communities are such examples.  Brett points out the laws of the present banking scenario will eventually be challenged, as the community ‘trust’ takes over.  However, for security aspects, between any two individuals, the need for a ‘public transaction record’ between two unrelated parties needs to be there.  This is where Banking 2.0 meets digital currency.  

In fact, as recently reported by Bitcoin Magazine, major financial players such as Citi, UBS and Barclays are exploring the blockchain, while a BNP Paribas analyst is persuaded that the blockchain could revolutionize finance. According to the Santander Innoventures report “The Fintech 2.0 Paper: Rebooting financial services,” blockchain-based technology could save banks $20 billion per year by 2022.

With open trust communities engaging in transactions, the concept of bitcoin transactions (even if it is replaced by another evolution such as Bitcoin 2.0 – which is a completely unrelated topic).  The key factor here is that organizations like AmazonPayments ™, who are virtual and digital currencies are jumping onto the mobile platform.   

Now banking and Digital currency used to be two separate worlds.  How seriously should banks take the blockchain. About as seriously as you should have taken the concept of the Internet in the early 1990s. It’s a big deal.  Digital currency will play be a disruptive factor in Bank 2.0.  

In our next blog, we shall explore how the real aspect of Bank 2.0 – mobile banking and digital currency get together.  That will bring us to the ultimate challenge to the ‘Security in the Digital Economy’.

Image courtesy: martialtester.wordpress.com

Reference: Banking 2.0 by Brett King ( Google Books) ,  http://bitcoinmagazine.com