The legacy banking system is in the process of a technological refresh. This is rather like how cars are updated. A new car is redesigned every five years or so, and three years later they get some navigation system updates, a new grille, and maybe some increased  horsepower. The banking industry is certainly not getting redesigned, and the last time they had an engineering overhaul was way back when in the dot-com era, when online banking was added a generation ago.

Banks are never at the cutting edge, consistently being five to ten years behind the curve. Now, one international mega-bank, Santander, admits that one of banking's biggest assets, the fifty-year-old debit/credit card concept is in danger from the superior online payment technology known as Bitcoin.

Consumers win when banks compete

Competition is one of nature’s greatest concepts. Whether it is sports, business, or a fight for life in the jungles of Africa, only the strongest survive. Due to regulatory capture, this is not how banking works as centralized banking around the world is pretty much the only game in town, until 2009, when Bitcoin was invented. Now you don’t have to pay as much as 29.99% interest to make a payment or purchase with a credit card. You do have a better way forward.

Santander sees the clear advantages Bitcoin provides the consumer, especially through being of virtually no cost at all to use. The bank says in a new report published on Tuesday that if the mainstream picks up on Bitcoin in any form of mass adoption, debit and credit cards may go the way of the rotary phone.

"Simply put, we believe a future with Bitcoin transactions with their low (or no) costs and fees puts the entire business model of credit and debit card companies at risk. We believe brands such as Visa, Mastercard, Elo, and others could be safer from the Bitcoin threat, as, similar to banks, they could benefit from the Blockchain concept in order to lower transactions, IT, and back-office costs. In our view, it is definitely a challenge to SWIFT (banks’ interbank payment system).”

Earlier this week, we reported on SWIFT researching Bitcoin in-depth, to assess just how much a threat Bitcoin and its technology is to their future of global interbanking dominance.

To Bitcoin or not to Bitcoin

The report, titled “Brazil: Banks & Financial Services - To Bitcoin Or Not To Bitcoin?” comes after Santander held a meeting with Mercado Bitcoin, the largest Bitcoin brokerage company in Latin America, supporting over 150,000 clients.

In the report, Santander lists the following advantages to using “The future of money” which could, or should, leave the future of plastic in peril:

  • A merchant receives the money in 30 days (vs. 10 minutes in a Bitcoin transaction)
  • Consumers and merchants need card contracts (vs. no contract needed)
  • High fees for cards, such as gross MDRs, due to several middlemen—acquirers, brands, issuer banks (vs. no material fees in a Bitcoin transaction)
  • Local taxes for utilization of cards abroad (vs. no taxes)
  • IT and back-office costs are needed to process the transactions (vs. the free-of-charge decentralized Blockchain).

These are the major advantages that the Bitcoin community’s early adopters have known for years which the legacy banking industry is only just now willing to publicly admit.

By the way, some may ask “Who are Santander?” Banco Santander is not only one of the world’s largest banks, but Forbes lists them as one of the world’s largest Fortune 500 companies. They are ranked #37 in the Forbes 2015 Global List of World’s Largest Public Companies, ahead of powerhouses like the Ford Motor Co. and Proctor & Gamble, so their opinion is significant, to say the least.

Santander seems rather taken with the Bitcoin concept throughout the report. They also referenced the comprehensive investigation by the Bank of England last October which clearly stated that Bitcoin was the form of payment least likely to be used to fund terrorism, versus banking transfers, which was ranked as the number one source of terrorist funding.  

When it comes to the idea of Bitcoin going mainstream in a big way in the-not-too-distant future, Santander says “Finally, we believe that the question in this report’s title will eventually be answered with a resounding “Yes, to Bitcoin.”