The growing popularity of Bitcoin as a powerful transaction tool and its ability to bank the unbanked has finally started making enough noise to wake up the traditional banking giants. Banks and financial services companies have been enjoying monopoly over the “money-moving” business for a long time, since its inception. Their only competition so far has been other companies delivering similar services. Not anymore, as the impact of Bitcoin on the banking sector is now being openly acknowledged by Jamie Dimon, CEO of JPMorgan Chase in his recent letter to shareholders.
Banking the Unbanked
In the letter, while discussing the strategy and outlook, Jamie has outlined the challenges posed by Bitcoin along with startups working on banking alternatives, merchants developing their own networks, PayPal and services similar to PayPal to traditional banking business. It is not possible for traditional banks like JPMorgan Chase to provide real-time payment processing and there is a cost involved in moving money through traditional banking systems. Newer technologies like digital wallets and Bitcoin protocol have an inherent advantage over these things. With bitcoin, transactions happen in real-time and money can be transferred to anywhere in the world within minutes. In addition, the cost of transactions over the Bitcoin network is negligible in comparison to traditional options.
The Banking Industry’s Worst Nightmare
While Jamie expresses his annoyance and pledges to fight the odds to stay on top of the competition, the message of this letter clearly showcases the banking industry’s fears. He had expressed his concerns over the emergence of new age alternatives to the investors over a year ago, since then the threat has grown in size, causing panic in the banking sector. In order to stay in business, banks will have to innovate fast and push the countries to adopt digital currency. In this fight between David (Bitcoin services) and the Goliath (Traditional Banking), we have to see who will emerge victorious.