July 9 update:
_{3 days after posting, Visa acknowledged that Bitcoin has a future in payments. This is an understatement, of course. The bank described below goes a step further by acknowledging that the entire financial infrastructure may cave to cryptocurrencies.}

French bank BNP Paribas warned customers and investors that the technology behind bitcoin might one day overtake conventional, account-based financial institutions, thus rendering existing companies redundant (that’s British for “obsolete”).* It’s a tectonic acknowledgement from one of the world’s biggest banks.

Analyst Johann Palychata writes in the company’s magazine Quintessence that Bitcoin’s blockchain, the underlying architecture that allows cryptocurrency to function, “should be considered as an invention like the steam or combustion engine,” that has the potential to transform the world of finance and beyond.

Check out the full story by Oscar Williams-Grut at Business Insider.

* Will cryptocurrency really put banks out of business?

Not even close! Bitcoin and the blockchain are likely to obsolete the current service mix of financial institutions, but I believe that for savvy governments and established businesses, it represents a long term opportunity rather than a threat.

• Are banking institutions threatened by decentralized cryptocurrency?
• How is Bitcoin disrupting existing payment processors/companies?

I invite you to read an interesting metaphor (1st link above). It is the true story of an electrician who was frustrated that the internet made it possible for his clients to find the wholesale cost of lighting fixtures, thereby undermining his ability to inflate cost of goods in his quotes for electrical work.

(Solution: Bill the customer for value added by your professional skills and billable hours rather than access to materials that they can buy on their own).

I love analogies, and so here is another: In the 1970s, the fax machine business shifted to Japan. Today, few companies make single-purpose fax machines. The last few were Brother, Sharp, HP, Canon and Panasonic. Yet, all of those companies are thriving today—even though the fax standard is dead today (or is, at most, it is an online service for those few times that email will not suffice).

What about Banks?

Sure, banks will be forced to shift emphasis from a core profit center. But with the advent of PayPal, Zelle, Venmo and Popcash, they have been undergoing this shift for years. The fraction of their business devoted to credit and checking will die or change significantly, and the days of bank wire transfers are certainly numbered.

But here’s the thing. Many banks don’t even charge for a checking account. They do a lot more than move money. Banks offer savings accounts, car loans, business loans, inventory factoring, mortgages, escrow services, real estate rescission and contract mitigation. They arbitrate disputes and fraudulent charges, offer identity protection, exchange foreign currencies, perform brokerage services, administer College 529 accounts, IRAs, KEOGH and 401K, operate investment clubs and charity drives, and much, much more.

These are a lot of activities—and they each convey value to consumers and businesses. Unlike moving money, they are services that have not been displaced by p2p technology. And this list barely scratches the surface. (I am not in the business of banking. I invite bankers to add expert areas that I have overlooked).

Banks have their fingers in a lot of pies. They will survive and profit by shifting their focus and fees to more closely match the expert skills, tools and licensing that makes their services a value to your family and to your business.
__________
_{The author is Co-Chair of The Cryptocurrency Standards
Association [crypsa.org] and chief editor at AWildDuck.com}