The advent of technology has always been seen by most people as something to be applauded. As a matter of fact, technology is probably the biggest and most important causative factor responsible for the kind of growth and development the world has seen over the last few centuries. No matter how non-technical a person’s life or job currently is, technology still plays a huge role in day-to-day activities.
Along with most other sectors, the banking industry has significantly improved over time because of technology and is one of the sectors that seem to be largely immune to certain technological innovations until now.
In the past, the sector has had to grapple with fighting certain risk factors and it looks like new and emerging financial technology is now one of them. Top of the list of these new technologies affecting banking are artificial intelligence and cryptocurrencies like Bitcoin. The risk posed by Bitcoin is becoming so heavy that the Deutsche Bank, one of the world’s largest banking institutions, is now looking to completely overhaul its entire design.
Deutsche Bank Layoff
According to reports, Deutsche Bank will heavily retrench its workforce by almost 20,000 people by the year 2022.
Founded in 1870, the bank is now 149 years old and according to the CEO Christian Sewing, it will be taking very decisive steps to rebuild its model to accommodate new technologies. Sewing said:
“The rebuilding will, however, only be successful if we fundamentally reshape our infrastructure – all of the cross-divisional functions supporting the businesses.”
Garth Ritchie, the bank's head of investment banking has already announced on Friday the 5th of July, his departure from the firm probably due to stagnancy.
Apart from laying of its staff, the bank also intends to invest a whopping 13 billion Euros in technology in the same year.
Bitcoin Could Impact The Banking System
Overtime, there have been a few factors capable of worrying traditional banking systems. For example, banks sometimes run out of cash due to a large number of liabilities and are eventually unable to handle these when they need to.
At other times, the problem might come from regional or political unrest which could affect rates within and outside the country, also affecting its banking systems. In the case of Venezuela, for example, local banks were forced to raise interest rates so high that it was almost impossible such loans to be accessed.
It has also been estimated by the Deutsche Bank that the ongoing economic tussle between the US and China has cost the global financial market as much as $5 trillion. Usually, to support a country's banking system, the government steps in during crises.
It would seem now, that cryptocurrency is slowly becoming a serious problem that can no longer be ignored by the banks and Christine Lagarde is tooting her horn as a wake-up call for the banking system. Lagarde who is the Managing Director and Chairwoman of the International Monetary Fund, has said in the past that cryptocurrencies are “clearly shaking the system” and are a threat to its permanence. She said:
“We do not want innovation that would shake the system so much that we would lose the stability that is needed.”
Lagarde was recently nominated as the incoming president of the European Central Bank.
The Future Of Banking
Cryptocurrency is bound to excel in climates where unfavorable financial problems are being faced.
The US-China problem was regarded at one time as a major factor that contributed to one of Bitcoin’s many spikes and Bitcoin bulls have publicly expressed suggestions that newer technology like crypto are better than traditional ones. According to Mati Greenspan, Senior Market Analyst at eToro:
“The whole financial system is dying a slow death. Let's hope the new one is brighter”
It would be safe to assume now that many banks all over the world will consider following the footsteps of Deutsche Bank and will try to remodel their framework to support cryptocurrency so they don't get left behind.
There is still a lot of flak the crypto sector gets but there's also a very high chance that people who lose their jobs from this type of remodelling would most likely seek refuge in cryptocurrency startups, consequently growing the crypto industry.