Cryptocurrencies have been growing all over the world in the last years, and traditional financial institutions, including banks, are worried about how to compete against cryptos. Bank of America, one of the most important banks all over the world, has informed that it might not be able to compete against cryptocurrencies.
This is the first time that a bank recognizes such difficulties. According to a report released by the institution, it explains that it might not be successful developing new products and services.
With the growth in the crypto and blockchain world that we have been experiencing in the last times, it may be difficult for banks to offer competitive services and keep updated. The new products released to the market by start-ups and other companies can reduce the net interest margin and revenues from the fee-based products and services.
The bank explained in the report:
“In addition, the widespread adoption of new technologies, including internet services, cryptocurrencies and payment systems, could require substantial expenditures to modify or adapt our existing products and services as we grow and develop our internet banking and mobile banking channel strategies in addition to remote connectivity solutions. We might not be successful in developing introducing new products and services.”
Bank of America is also investing in blockchain technology to keep updated on the latest trends. For example, the company wants to implement a blockchain system to authenticate personal and business data. Authorized parties would have access to it and it will keep a log of every single person that requests and access the data.
It is important to mention that other banks are also experiencing such difficulties, and in other to solve this issue, they will have to invest important sums of money.
JP Morgan Chase Threatened
JP Morgan, for example, explained that Cryptocurrencies are a risk to its business. On February the 27th, the banking institution released its annual report to the US Securities and Exchange Commission (SEC) where they explained that new companies have emerged and are threatening JP Morgan’s operations.
The bank explains that the financial services industry is very competitive. Moreover, the institution believes that if it is not a strong and effective competitor it will lose an important part of the market against new startups and companies.
JP Morgan said that it will be spending more money in order to modify or adapt its products to this new era, but it will not be easy.
The bank is already working with blockchain technology. Indeed, it has developed a very interesting blockchain network known as Quorum. Several companies have embraced it and are using it on a daily basis.
The Bank explained about this situation:
“The financial services industry is highly competitive, and JPMorgan Chase’s results of operations will suffer if it is not a strong and effective competitor.”
Banks are sometimes not effective competitors because the services and products used are expensive to use and slow. At the same time, cryptocurrencies and blockchain products are fast and with lower fees.