Can a Fintech Mobile App Replace Banks?
Oct 01, 2019 at 09:01 //
News
In today’s world banks are a mandatory link in the chain of our financial interactions. Banks are unavoidable hubs that are involved in any operation, be it a personal money transfer to a friend or a large scale enterprise deal. But as any hub – banks are centralized. Does it mean that banks have unrestricted access to your hard earn funds? The short answer is – yes, it does.
The sad truth is that due to centralization banks have the end means to cease your capital at any point. It does not necessarily mean that they are going to, but should new laws come into place or an out-of-the-ordinary situation accure – your assets can be taken away from you. That just shouldn't’ be the case. In addition, banks have a limited number of options when it comes to availle assets. Should you want to purchase something abroad in another state’s currency, you end up having to pay enormous exchange fees and suffer from the worst possible exchange rate that the bank provides.
This dramatically impacts the usability and customer experience. What’s more, even though in recent years some of the more advanced banks developed fairly good online banking solutions, still, in many cases relatively easy actions such as sending money abroad may require going to a local bank by foot, waiting in line, talking to a manager and generally wasting time.
And what about sending money abroad? Transaction fees are so high it would be easier to take a flight to your destination and deliver cash in an envelope. Joking aside, a study shows that out of 700 surveyed migrants, over half use Paypal or a service like Western Union, sending an average of $3500 abroad, these people lose hundreds of dollars on fees!
What’s more, according to official data wire transfers take from one to four business days to complete, which is a long time to wait for a payment. And that’s business days, so if a transfer is sent on Friday it will likely take nearly as much as a week. Moreover, from unofficial reports and personal experience it is safe to state that transfers can take over 2 weeks.
Perhaps even worse that that is the fact that wire transfers can actually get lost. And it often happens due to a clark’s mistake in manual processing. Whenever human factor is involved there is a room for error. As a consequence you or the receiver won’t see the money possibly for months, if not ever.
After examining the situation it becomes apparent that banks are nothing but a barrier that exists to make our financial management more complex and, puts our funds at risk. And then we are shamelessly charged for it!
So What Can We Do?
The banks have been there for centuries. Is there a way to solve the problems above and manage our finance without them? And if so, why hasn’t this solution already been developed? The answer is, until recently centralized parties such as banks were a necessary evil because they were mandatory for administrative purposes. Someone or something needs to calculate rates, process transactions, interact with clients and ensure that the system is working.
But with the development of technology the landscape has transformed. In particular, blockchain allows us to create self-governing, decentralized ecosystems that are completely trustless. With blockchain the laws of the system are indebted in the code that can be openly viewed, but can not be altered, because they are contained on all participant devices of the network.
Based on this, we believe that our application called Channels has a set of functions that can successfully provide an alternative to banks.
What Makes a Better Tool for Financial Management?
Full decentralization and blockchain technology are a cure to the ownership problem of banks being able to take away someone's assets. With decentralization there is no single party that has control over the whole system. You are the only one who can access your assets. That’s the core and most important idea behind Channels.
Another advantage that blockchain and cryptocurrency bring to the table is diversity of assets. Thanks to a technology called colored coins, applications like channels can digitize and mathematically link tokens to real assets. These tokens then become a representation of ownership of the real asset and can be sent, exchanged, gifted or used to make a purchase.
One more core problem of banks is high transaction cost, especially when it comes to cross border payments. Blockchain based solutions eliminate this issue by potentially improving speed of cross-state transfers, because intermediaries like beneficiary banks are eliminated. As a result transaction costs can also be significantly smaller. This aspect makes a huge difference to all those people who come to work abroad and regularly send money to their payments at home. Furthermore, payments in blockchain can not get lost, there is no human factor involved.
In addition, there is a regulatory side of things. Only fiat capital is currently taxed in many legislations, and while blockchain and cryptocurrency regulations are being formed, it is possible to lawfully use cryptocurrency as a payment medium in business without having to deduct taxes from transactions. Taxes begin to be applicable only after cryptocurrency capital is withdrawn as fiat. For instance, this is a big advantage for bloggers or any entrepreneurs working online whose reward is not equal to the income, and can include expenses.
Simplicity of user experience is also elevated. For example, Channels app is just like a wallet. How difficult is it to use a wallet? You put money in it, hold it there, take it out when you need to pay for something. Your payments are untraceable. Channels is just like this, but with the added benefit of technology that allows to exchange assets and send them to other countries with a single push of a button. That’s an experience that is completely new for a lot of people, when changing currency does not involve waiting in line of a bank or an exchanger.
What’s more, in the near future we are going to issue a unique banking card that will be linked to Channels. By reengineering how traditional payment systems work and minimizing the amount of intermediaries using the blockchain technology, we will be able to make a card with the highest cashback in Europe!
Summary
With the development of technologies we have arrived at a point when old fashioned ways of finance-management are no longer needed. With the new form of money we need new tools to control them. It’s time to leave the past behind us and take a step into the new age of capital management with applications like Channels!
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