As Banks continue to flounder are Cryptocurrencies playing a canny ‘backgame’?

The continued ineptitude of banks to address Cyber Security fundamentals comes to light – ‘UK high-street banks accused of “shockingly bad” online security’.

Don’t think this is some backwater technology:

• Global Insurers Will Embrace the Blockchain
• Microsoft has announced the latest update to its forthcoming blockchain-as-a-service (BaaS) offering for its cloud-based Azure platform.

As Cloud Computing has eaten the legacy IT industries breakfast and lunch it could be moving onto a veritable banquet. Consider what BaaS could do to the financial institutions and transactional markets if it follows the transformative impact of Iaas and SaaS on traditional IT Infrastructure and Software markets respectively.

The day will come if the banks do not get their act together when they will suffer the relegation of many traditional business models in the face of this rolling waves of Internet generation innovation. The young kinds on the block quietly strutting their stuff are Cryptocurrencies (the current poster boy being Bitcoin) and their backbone technology the Blockchain.

Bolstered and buttressed by years of regulation and plumbed into the very fabric of our lives, and the very economies of nations, the traditional banking system has proven a robust stalwart. A veritable bruiser to critique, and weatherer of storms.

This is by no means news to many of us following the litany of online banking failures, to cherry pick a few:

• 2012 through 2015 – The Royal Bank of Scotland and its raft of associated banks and their online cock-ups that impacted 10’s of thousands of critical lifeline payments, illustrating starkly the creaking state of not just the banks IT systems but the traditional, I would even suggest legacy, banking systems still tolerated by consumers and businesses today. RBS reaches IT Incident settlement for its incompetence going back to 2012.
• 2014 – Bank Hackers Steal Millions via Malware.
• 2016 – HSBC’s online banking platform goes down.  NOT a Cyber attack says HSBC

Global banks, one of the world’s biggest cartels is literally crumbling under the weight of its own bullshit as the smoke and mirrors of dependency on rapidly ageing financial control get stripped away. The global banking system and its associates in the financial markets need to stop propping up their old practices and adapt or die.

The 2007/2008 financial crisis that rocked the world should have been the turning point but for political intervention. Governments in a state of paralysis over the economic impact of the banks follies were blackmailed into believing banks were too big to go bust and raided taxpayers coffers to all but nationalize many banks. Following which the culprits have subsequently got away scot free, with little meaningful regulation of change to prevent such an occurrence happening again.

In fact far from it. The European Central Bank (ECB) itself continuous to demonstrate the most self-serving practice in providing continued liquidity to the Greek Central Bank to prop up a bankrupt economy that can never pay back the EURO85billion that it has already been extended. Why? Because they fear the collapse of the EURO, or a significant devaluation on the markets if Geek exits the EURO if not the EU itself. The ECB is exercising the same type of fiscal obfuscation that the banks exercised in the culmination of the greatest financial crisis for generations.

The central premise for the existence of banks should be challenged. There are intrepid explorers of a new generation of Digital Financial Services and platforms that could viably make banks redundant in many of their forms today. The problem is that the Banks are so ingrained into the political and economic co-dependency with Governments that the challengers to the traditional bank service landscape are being suppressed, or at best bludgeoned with parochial regulation ill serving of what is of global not a regional or national context.

The stranglehold banks have on the transferring of funds and financial transaction management means they are able to levy charges that no longer reflect the effort or risk involved, but more so the need to milk someone to prop up their rotten edifices. Much of the consumer protection is valid and the KYC (Know your Customer) practical to combat organized crime and terrorism, but for many has gone too far and is now invasive and obstructive to everyday business.

Why did Canonical founder Mark Shuttleworth in 2013 have to pay 20m to transfer money he earned on a global stage from South Africa to another location of his choice? See Shuttleworth v South African Reserve Bank and Others. It was his money and whilst he would no doubt concede to a reasonable charge for servicing his request, I challenge the bank to show anyone the timesheets and asset use that constitutes that level of charge. OK the Government has an exit tax. Well that should at best relate to the proportion of the funds earned within that national domain, they should be grateful that he elected to hold ALL the funds in SA for the period he did.

This is an extreme example but many more exit, of smaller hard working business people who are doing nothing more than feeding their family across national borders and incur similar disproportionate charges not to forget the delays in funds transferred. Delays when money goes into ‘limbo’ for days, who enjoys the use of those funds and interest on them during this period? Just look at what is happening in the Peer to Peer (P2P) foreign Currency exchange, Forex comes of age.

The world, its markets, economies and population are increasingly globalising. Just like data, currencies (tokens of exchange) are pushing or freedom from the constraints of their traditional regional and jurisdictional boundaries and identities.

As long as the Banks and Governments continue to behave as if they are entitled to more than is a balanced reflection of their effort and risk in their jurisdiction relating to individuals or organizational income from assets and activities they will continue down the road of their own extinction. The ripple effect will be like nothing we have ever seen as it will go to the root and branch of economies and the very beating heart of governing regimes and institutions.

Thus is born the brave new world of ‘Collaborative Finance’.