Cryptocurrencies are digital assets that function similarly to traditional money and can be used for exchange. They are typically purchased through cryptocurrency exchange platforms and stored in secure crypto wallets. These digital currencies are decentralized and operate in a highly secure manner with few human interactions. As a result, many consider them to be the financial sector’s future.
Banks are the world’s current financial systems. They provide financial assistance in the form of loans, savings, and other transactions. However, unlike cryptos, they have numerous drawbacks due to their centralized nature and susceptibility to bias. They are also slower than cryptos, and some charge exorbitant interest rates on loans and transactions.
What Are The Main Drawbacks Of Banking Systems?
Ease of access
A good example is that banks are closed on the weekends and certain holidays. As a result, when attempting to perform important transactions on one of these days, people usually run across a number of problems. Banks also require people’s physical presence to complete large transactions, which takes an inordinate amount of time.
Inclusion in Finance
Traditional banking systems market their products using a variety of methods. They set aside some projects for specific groups of people that are not available to the general public. These groups benefit from soft loans, extended payment terms, and lower interest rates. As a result, the systems become unfair and lacking in financial inclusion.
Many mobile banking apps can be hacked by skilled technicians. As a result, some people lose large sums of money from their accounts. The systems are also vulnerable to fraud and money laundering. These events may result in the loss of hard-earned money.
Additional Service charges and Slow Transactions
During transaction periods, banks charge additional fees and taxes. For example, sending and receiving banks typically levy exorbitant transaction fees and taxes on international remittances. These transactions also take a long time due to slow protocols, especially for large sums of money.
How Cryptos Can Provide More Than Banks
Cryptocurrencies were created to address issues with existing banking systems. As a result, they should work harder to create a more effective global financial ecosystem. Here are some examples of how cryptocurrencies can provide better financial services than banks.
Unlike banks, cryptocurrency is completely independent of third-party control. This decentralized nature reduces human interactions, making them bias-free. They are more secure and reliable because they use anonymous ID numbers in transactions, making it difficult to tamper with them.
Concerns About Security
The most serious issue with financial systems is security. Cryptocurrencies are powered by blockchain technology, which is highly secure and free of major security threats such as hacking.
It is also free of fraudulent activities because the system processes transactions automatically with minimal human interaction. As a result, if cryptos continue to innovate in order to address security concerns, they will be able to outperform banks.
Smart contracts can also be run on cryptocurrency blockchain networks. These smart contracts are designed to take computer instructions and process them with as few human interactions as possible. As a result, they can be extremely useful in eliminating fraudulent activities and corruption, which pose a challenge to banks.
Unlike the traditional financial system, which has queues and protocols to follow, cryptocurrency transactions are extremely fast. As a result, cryptocurrencies can handle more transactions per day than banking systems. This functionality elevates them above banks because it provides the economy with a better chance of rapid growth.
Because there is little guidance and regulation surrounding digital assets, many financial institutions are hesitant to adopt them. Concerns about the security and stability of cryptocurrency also prevent banks from entering this space; however, rather than fearing the risks of this technology, banks should look ahead to its potential benefits. As with other technological developments in the past, there was the potential for criminal activity. There is also enormous economic growth potential. We should not give up those benefits just because there’s a chance of criminal activity. Instead, we want to provide compliance guidance to assist banks in innovating.