How Cryptocurrencies Will Transform Our Banking System

Posted: Updated:

Think cryptocurrency won't impact your life? Think again! Several of these cryptocurrencies are on track to solve inherent problems within our banking system. And that will likely transform how we produce and consume data, much like email technology and cell phones did previously.

Cryptocurrency has been making the news recently and will likely be in the spotlight for months to come - and with good reason. According to CNBC, experts predict the cryptocurrency market could reach $1 trillion this year. But it's the changes cryptocurrencies like Ripple are making within our banking system that promise to be the big story.

Speed and Cost: Two Barriers to Moving Money

The two main problems customers and banks face when moving money are how quickly it can reach the desired destination and how much the transaction will cost. Within the U.S. these issues aren’t as noticeable. We can easily move money around with a few clicks of a button or the swipe of a card. But try sending money overseas. You’ll be shocked by how long it will take and how much it will cost. In fact, it’s jokingly been said that the quickest way to get money from the U.S. to Europe is to withdraw cash from your bank, buy a ticket to Europe, and fly it there yourself!

Seriously though, there’s a lot of truth to that. Depending on where you are located in the U.S. it can take a day or more to electronically move money to Europe. If your goal is to move money to a place with a less developed financial system the delays and costs go up significantly.

Even in the U.S., there’s an internal cost for every transaction you make. Have you ever shopped in a store that has a sign stating the minimum amount you must buy before you can use a credit/debit card? The reason for that minimum is the costs that must be paid to all parties involved in the transaction and the costs involved in ensuring the transaction is completed without fraud. Retailers can lose money on small-dollar transactions, if they don’t stipulate a minimum purchase.

Solutions Are in the Offing

Ripple, currently the second largest cryptocurrency behind Bitcoin, is focused on finding solutions to these problems. Ripple is currently partnering with banks to use its XRP cryptocurrency system to move currency anywhere in the world instantly - and with virtually no transaction costs. That has huge implications for reshaping our banking system. But it will impact other areas of our lives as well.

Think about the impact email had. Prior to email you had to physically mail information to another person. That took time and money and probably limited the amount of mail you sent.  Using email you may send and receive dozens of emails each day - quickly, with zero cost. This has reshaped how businesses work and how we communicate.

And how about photos? Not too long ago, you likely took only a handful of photos in a month or even a year. Why? You had to have a camera with you, it needed to be loaded with film, and it cost money to buy and develop the film - not to mention the inconvenience. Today you can take a limitless number of digital photos with your mobile phone at virtually no cost. This transformation led to the creation of firms such as Instagram and Snap.

If you consider the far-reaching impact email and digital photos have had, it’s not such a big leap to envision how this transaction-free payment system could reshape how we produce and consume data. We can only imagine what businesses will be created when that happens!

Summary

It’s too early to know which cryptocurrency will eventually dominate the currency space, so making an investment is pure speculation. But the ability to move money instantly and without cost is a powerful new tool that will disrupt our current banking system. And you won’t be immune to its impact. The next time you’re thinking about buying a stock ask yourself: Will this stock be hurt or will it benefit by this shift to an instant, transaction-free payment system?

Ryan Collier is the Director of Investment Management with Bedel Financial Consulting Inc., a wealth management firm located in Indianapolis. For more information, visit their website at bedelfinancial.com or email Ryan.

  • Perspectives

    • Three Ways to Stand Out In a Competitive Hospitality Market

      For many business leaders in the Indianapolis area, it can be difficult to differentiate your brand from competitors. Indianapolis is booming, and we're in an era where consumers have access to countless choices! That's why it's more important than ever for brands to provide consumers with compelling reasons to spend their hard-earned money on their product or services.

    More

Subscribe

Name:
Company Name:
Email:
Confirm Email:
HTML
INside Edge
Morning Briefing
BigWigs & New Gigs
Life Sciences Indiana
Indiana Connections
INPower
Subscribe
Unsubscribe

Events



  • Most Popular Stories

    • Walmart Details Crawfordsville Layoffs

      Walmart Inc. (NYSE: WMT) is reducing workforce at the Walmart Optical Lab in Crawfordsville. In a notice to the state, the company said 108 employees will be out of work by the end of September. A corporate spokeswoman told Inside INdiana Business the decision was a response to "changing business needs." She added "we are making adjustments at our Walmart Optical Labs in Crawfordsville to help ensure we have the right people in the right place at the right time."

    • Brown County Aims to 'Buck' Rural Flight

      The Maple Leaf Performing Arts Center isn't the only big ticket project making progress in Nashville. Town Manager Scott Rudd says some $40 million in projects designed to the boost the quality of life for locals and visitors alike are in the works in the tourism-focused community. The owners of Big Woods and Quaff On breweries are just days away from the grand opening of the multi-million-dollar Hard Truth Hills attraction in Brown County, which covers 325 acres and includes...

    • Officials broke ground on the project more than two years ago.

      Steel Producer to Open Shelbyville Plant

      Governor Eric Holcomb will Wednesday join executives from Nippon Steel & Sumikin Cold Heading Wire Indiana Inc. to cut the ribbon on the company's 150,000-square-foot facility in Shelbyville. The $50 million project is expected to create up to 70 jobs by 2021.

    • Schellinger says, since 2014, aerospace firms have announced more than $900 million in Indiana investment.

      Hoosier Aero Strength on Display in UK

      For the fourth straight year, Indiana has a delegation at one of the largest aerospace events in the world. Secretary of Commerce Jim Schellinger says attending the Farnborough Air Show in the United Kingdom connects the state to global leaders in aerospace, defense and aviation. He says the growing industries are targets for Indiana in part because those jobs pay well above Indiana's average wage. Schellinger is also meeting with several UK companies this week before traveling to...

    • Tech Apprenticeship Company Scores $4.2M

      Kenzie Academy Inc., a technology industry apprenticeship program that has its first campus in Indianapolis, has received a $4.2 million seed round of funding. The company uses what it calls a "college-alternative" model that involves a year of immersive learning and a year of paid work at its consulting subsidiary, Kenzie Studio. Kenzie Academy says the investment, led by New York-based ReThink Education and supported by...