The McKinsey Global Banking Annual Review predicts that the current technological competition, may lead to losing almost two-thirds of the banking sector profits due to the rise of the digital currencies.

According to the review, the emerging digital currency processors are likely to reduce costs over the next decade, allowing to deliver financial services at lower prices and consequently reducing profits and revenues from non-mortgage retail lending (credit cards, car loans) by 60 and 40%, and from payments processing, small and medium-sized enterprise lending, wealth management and mortgages by 10-35%.

The unwillingness of the digital currency companies to sign up to the banking sector rules as well as their desire to eliminate the main drawbacks of the current banking system by working directly with the customers is another aspect of the shift, considered to be of utmost importance by the experts.

“They want to squeeze themselves in between the customer and the bank and skim the cream off,” Philipp Härle, the co-author of the review, told the Financial Times when commenting on the rise of the cryptotechnologies.

The McKinsey experts believe that the banking sector faces two choices - to fight for their market share, or let customers deal with digital companies, preserving banks’ role of “a lean provider of white-labelled balance sheet capacity”.

The process may be slowed down if regulations similar to the traditional banking sector ones are imposed on the digital financial sector. An appeal for introducing such regulations has been voiced by the European Banking Federation earlier in September, whereas in the U.S., the New York State has introduced the BitLicense on 03 June.

Meanwhile, the world leading banks cooperate to research the blockchain technology and the cryptocurrency potential, 22 of them joining their efforts in the R3 project.

Nevertheless, the fundamental changes are yet to come as for the time being the influence of the emerging technologies is not that overwhelming and the banks' share on the financial services market has been stable for more than 15 years.


Maria Rudina