Why I believe banking is broken and cryptocurrencies may able to fix it.

Greetings from Portugal.

The banking industry provides a safe and secure place for people with excess money to deposit it and earn a small incentive while lending the money out to those who need it but lack the capital. Banks have become masters at mitigating risk and making everything as uniform as possible.

However, the current issue with banking is that it has become so consolidated that it can no longer perform its role as a financial intermediary effectively.

The mid-1990s marked a significant change in the banking industry when computers and credit scores became widely adopted, leading to a shift from building relationships with bank managers to relying on credit scores. Today, when applying for a home loan, borrowers typically do so online, at a branch, or through a mortgage broker, and the details are sent to an assessment office where workers verify that the information is correct.

But the most serious warning he has issued in the last two decades has been that large consolidated banks are increasingly unwilling to lend to the business. Inherently, business lending is more difficult than consumer or residential lending. If a mortgage default occurs, the bank will still have a house to sell in order to recoup some or all of their losses. If a company fails, a bank will most likely never see that money again. Businesses are also becoming much more complex. To mitigate risk, a bank would need to assess the health of a business, which is extremely difficult. Certainly, it goes far beyond the scope of the standardized mortgage application process.

As you may see, there's a pattern here. Automatization and digitalization can solve this kind of problems.

Instead of fearing the risks of this technology, banks should be looking ahead to its potential benefits.

Cryptocurrencies can help banks become more competitive in today's increasingly digital business environment. The first step is raise own awareness, because they can help attract new customers and prevent existing customers from migrating away.

I would love to ear the community thoughts on this!

Thanks!