«From banking secrecy to crypto-banking.»

Peter Schnürer


From banking secrecy to crypto-banking.

Much is designated as revolutionary under the term “digitalisation”, which, in reality, only represents a long-overdue further development of existing services. The true revolution is driven by technologies requiring a complete rethink in customer relationships – at a speed which the financial sector has not previously experienced.

Disruption and blockchain, digital banking und Fintech – these and similar are the buzzwords of the hour. Innovations for the finance industry are thrown onto the market virtually every day and doom scenarios for the established banks are painted on the wall.

One thing is clear: the banking world stands before one of the most fundamental upheavals in its history – the consolidation of the segment has commenced. The “survivors” restructure, industrialise and carve out of their added value those parts which can be undertaken more efficiently and cost-effectively by external, specialised service providers. So far, nothing new or even revolutionary, for industry already has the edge on the banks.

Yet banks are for the most part only turning the screw on costs. In reality, however, digitalisation is not only concerned with the optimisation of costs, but with new business models and financial products. We must view financial services in the context of a digital structural change and understand: by 2020, 20 billion devices will be connected to the internet. These devices will relieve us of many daily tasks and assist us in making complex decisions.

The digital structural revolution

Number of connected devices on the internet worldwide (in billion)

Forecast monthly portable device traffic in mobile phone networks worldwide (in petabyte)


Internet of Money creates innovations

In this connection, the term “Internet of Things” comes to mind – from the perspective of the financial sector, however, this term is misleading. For these devices account for 40 percent of the global data traffic and process transactions for their owners: ordering fuel oil, increasing accident insurance coverage on the ski slopes, where required, optimising retirement planning, garage servicing for self-driving cars und much more. From the perspective of the finance industry, it should be referred to as the “Internet of Money”, as financial transactions are behind many of these activities.

Whoever understands this can address new customer segments in a differentiated manner and be quicker on the market with innovative services. The bank must nevertheless realise its differentiation potential in the digital market and draw up their business model accordingly. It must identify the fields which it no longer wishes to manage in future and in particular, it must ask itself the question where digitalisation opens up completely new fields of activity in which it should play a role. Only when this “digital agenda” is prepared, does technology come into play, being able to unfold its disruptive potential. Whenever we talk about technology, it relates essentially to the interdisciplinary use of big data and analytics, artificial intelligence and, as a fundamental basis for banking in the future, cryptography.


Change through to technology-driven banking

Cryptography already forms the basis for privacy in the electronic communications between the customer and the bank. E-banking without reliable encryption is not conceivable. In this respect, we should be aware of the fact that cryptography is by far much more than pure encryption: with cryptographic methods one ensures additionally that data is not manipulated and the author of the information is explicit. That sounds banal – but has massive impact: all sectors which draw their raison d’être from the relationship of trust to their customers stand in front of a radical change. Where nowadays confidence is “produced” at enormous cost with regulation, compliance, audit and a sealed-off IT, cryptography can build confidence in an automated manner on a technological basis – at a fraction of the cost.

«Cryptocurrencies, as a monetary and economic-policy control instrument, can, for instance, be furnished with a maturity date or a specific intended use. This multifunctionality embedded in the Internet of Things opens up hitherto undreamed-of possibilities.»

Technological pioneers show under the term “cryptofinance” how they imagine the future: open tamper-proof systems lead to transparency, digitally signed documents create binding obligations, automated contracts produce economies of scale and pseudonymised transactions on these platforms create privacy. Although there are, time and again, negative reports about such leading cryptofinance representatives as Bitcoin or Ethereum, the still very young scene shows itself to be extremely robust against setbacks and works consistently on further development.

Cryptofinance brings about several paradigm shifts in our understanding of money. Cryptocurrencies continue to serve as a means of exchange, but they can be assigned programmed functions, so-called smart contracts. Money issued only following the 4-eyes’ principle, fully automated processing of letters of credit without banks, private currencies based on gold and much more, is conceivable. Cryptocurrencies, as a monetary and economic-policy control instrument, can, for instance, be furnished with a maturity date or a specific intended use. This multifunctionality embedded in the Internet of Things opens up hitherto undreamed-of possibilities.


New cooperation models for an all-embracing customer experience

How can a bank position itself in this environment? The experience of recent decades shows that those who will be successful in the final event are those who are best positioned to recognise the needs of the customer and implement them in products.

n this respect, it is not just a matter of the much-cited “Generation Y” which envision banking as being more digital, more modern and more comfortable. It is a question of bringing to the customer, in a highly-interconnected world, the correct financial products at the appropriate time. Many see their core competence in client relationships. They attest to their proximity to the customer and assume to know his/her needs very well. Consequently, this means that a bank which espouses the customer interface, must in future work in close cooperation with suppliers of wearables, home-automation systems and self-driving cars. For, in future, these devices will represent the interface to customers. In other words: the customer rarely goes to the bank branch, but uses his intelligent refrigerator, his interconnected car and his smartwatch every day. Banks, insurance companies and industrial enterprises have a unique opportunity to now offer products to their customers which bring together the “world of things” and the world of finance. For this, they must work in concert and create joint platforms.

Time is running out – as mentioned, by 2020 there will be 20 billion devices which can tell us which needs the customer has at the very moment in time. The clock is ticking and time is money – who would not know that better than banks?