The big five, Facebook, Amazon, Apple, Microsoft and Google (FAAMG) are continuing to chip away at the banks.
Facebook has announced Libra, a stablecoin to be used for payment in WhatsApp and Facebook Messenger. Libra is a stablecoin pegged to a basket of traditional currencies to minimize fluctuation of its value.
Banks must realize who their real competitors are and form new alliances to address these new threats.
Instant, low-cost international payments are a perfect catalyst for this. Banks should adopt a federated stablecoin that enables instant, low-cost international payments to compete with Libra and other initiatives. This stablecoin must be bank-grade, meaning it is secure, safe, fungible between multiple issuers and with clear sight of source of funds to support robust AML and sanctions screening.
Banks must stop worrying about the competition from peer banks. The real threat is from the large tech companies.
Customers want fast, affordable cross-border payments. Who do you go to (or, perhaps, who did you go to) when you need to make a payment? That’s right— your bank. Does your bank provide such a service? No. As a result, there is a gap between supply and demand. When incumbents don’t fill the gap, someone else does. Always. This is what leads to disruption. In most cases it’s not the technology itself that disrupts, but new business models.
This time is no different. Several stablecoin initiatives have recently been launched (or are in the works) that fill the gap for an instant, low-cost international payment without the involvement of banks.
