Banking and cryptocurrency are natural enemies.
While there is some crossover in projects such as Ripple which augments inter-currency banking services and in JP Morgan’s upcoming new “cryptocurrency”, the two industries are inherently competitive with each posing a threat to the other’s existence.
Despite the (sometimes accurate) portrayal of cryptocurrency projects being mere speculative products to gamble on, the real players in the crypto and fintech industry are those which offer actual financial services that compete with archaic banking services suffering from the innovation stagnation that comes with all long-standing monopolies.
Banks haven’t changed much over the years simply because they didn’t have to – but now it seems that they may have lain dormant and complacent for too long. New, high-tech, hungry competitors have emerged to give the banks a run for their money, so to speak.
Based in the US, Robinhood is a stock trading app which also allows users easy access to cryptocurrency purchase and trade. The firm aims to become a licensed banking institution which will make it an online digital banking solution that recognizes the value of cryptocurrencies and enables users to bank from their phone.
Valued at $5.6 billion, the service is offering millions of customers early access registration to a zero-fee checking and savings service with a 3% rate of interest and a free debit card with free withdrawals at 75,000 ATMs throughout the US. The lack of fees and industry-leading rate of interest demonstrate that Robinhood isn’t messing around and is going after major banks in a very real way.
The service will be offered at first through the firm’s broker-dealer license with all cash deposits insured by the SIPC up to a value of $250,000.
“We expect by the end of the year to be either the largest or one of the largest crypto platforms out there,” Robinhood co-founder and co-CEO Baiju Bhatt said in May. “But we also really feel we’ll have the absolute best experience for investing in crypto as well—from having a large variety of coins available to a more favorable cost structure—mainly no commissions—to just quality of product.”
Coinbase is another major player in the industry, founded in the early days of crypto and managing to maintain and grow its market share by staying relevant through offering convenient ease of access to cryptocurrencies in a space often criticized as overly technical and inaccessible.
Starting off as a wallet and digital currency exchange, Coinbase evolved into a service that offers custodial services for institutional hedge funds and other clients to deposit a minimum of $10 million.
With over 20 million accounts, Coinbase was the entry point for many cryptocurrency investors and traders. The appeal of Coinbase has always been the lack of signup friction – it’s easy to sign up and start buying crypto, and with 2 billion unbanked people in the world, it could be that Coinbase will serve as an alternative to banks.
Users can buy BTC once in person through a service like Local Bitcoins and then use that to fund their Coinbase account, giving them access to the increasingly large amount of goods and services available for purchase with cryptocurrencies.
Revolut, Affirm, Others
Then you have fintech services like Revolut and Affirm. Affirm is a financing alternative to credit cards and other credit-payment products. Affirm offers instant financing for online purchases to be paid in fixed monthly installments over 3, 6, or 12 months, offering more seamless financing options than most banks.
Revolut offers users a free debit card, access to crypto, and zero-fee exchange between fiat currencies. Unlike a bank, if you lose your debit card you can simply freeze it on the app and unfreeze it if you find it again. You can change your PIN number from your phone and travel around different countries without suffering from exchange rate losses.
These are the kind of basic services that it seems banks could have offered all along but simply haven’t bothered. Revolut has already secured a banking license, and its CEO Nikolay Storonsky says that it’s too late for traditional banks to catch up now.
“Our vision is that retail and business customers will be able to apply for a loan in just two minutes from within the app, and then have the money in their account almost instantly,” he added. “We’ll remove the bureaucratic process and come in cheaper than traditional lenders.”
Too Late For Banks?
With a sudden surge of cutting-edge, highly-competitive fintech and crypto banking services offering objectively superior services to banks, it seems that the newcomers are competing with each other moreso than banks which are getting left behind.
Traditional banks have huge amounts of assets at their disposal, as well as public recognition. They also have a reputation tarnished by scandal after scandal, repeatedly engaging in fraud and compromising entire economies. People don’t trust banks any more, and it seems that it’s only a matter of time before they turn to these promising alternatives which may well be the banks of the future – and the future may closer than we think.