Finance, both personal and otherwise, has long been an esoteric field, its intricacies walled off from those on the outside. But the way people consume financial services is changing, with ever-expanding digital capabilities more and more accessible. Writing for TechCrunch, Pierre Brais, argues that the stranglehold that the old world of large financial institutions has on these services is rapidly eroding.
Brais, a venture capitalist and founder of Olocode, a digital business card sharing platform, sees the disruptive forces of the internet radically reshaping the way we purchase and consume financial products. This democratization, in Brais’s view, will lead to continued innovation and lower costs.
Prior to the financial crisis, consumers and regulators alike were wary of trusting new entrants into the financial sector. But since that time, trust has shifted away from the big banks. Brais points to the JOBS Act and the FSA restructuring the U.K. as just a few of the ways that the landscape has become easier for startups offering financial services. Ironically, many of those entrepreneurs who are putting these products to market are former employees of the big banks, who understand the limitations of the large corporations.
Money Going Digital
Mobile payments served as the first wave of digital financial products on platforms like Square or Braintree, but companies like Dwolla and TransferWise are pushing towards money transferring and foreign exchange. And with digital cryptocurrencies such as bitcoin gaining traction, consumers are showing clear signs that they are becoming more comfortable with keeping their money within the digital realm. Large banks can be slow to respond to this rapid level of evolution that we are seeing in the digital finance realm.
Digital Currency Can Obviate Big Banking
Some predict that the third wave of digital finance, digital currency, can make the big banks obsolete. While such a bold prediction still lies entirely within the realm of speculation at this point, what is clear is that digital banking and digital finance has a way of eroding the need for an intermediary between savers and lenders, the primary function of the banking system. Brais predicts that more and more customers will be empowered by the nimbleness and freedom afforded by digital financial products, making it harder and harder for big banks to maintain control over finance.
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