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NEW YORK (InsideBitcoins) — In the U.S., more than one-third of consumers use smart phones to issue payments. “Unfortunately for banks, many of these payments are transacted through mobile apps controlled by online-payments specialists and digital merchants,” says global consultancy McKinsey & Company in a recent report. “Payments represent the beachhead for the entire banking relationship, and this beachhead is under attack.”
McKinsey analysts say digital banking is imperative for banks. But without mentioning Bitcoin, the most popular digital currency in the world, the consultants say financial institutions are losing influence to “nonbank attackers, ranging from large telecommunications companies to small and nimble technology players, that are defining the standards for digital banking.”
Those attackers include Google, Apple and PayPal – all of which have begun circling Bitcoin in one way or another.
“If the payments beachhead falls into the hands of cutting-edge banks and nonbank competitors, the losers will remain in a defensive posture, burdened with chronic slow growth and thinning margins,” the firm’s analysis says.
While McKinsey’s latest report on innovative digital payment systems remains moot on cryptocurrencies, a report issued last summer made the connection without equivocation.
“New payment systems have also led to the emergence of virtual currencies. Safaricom’s M-Pesa service in Kenya and Tanzania now allows more than 15 million users to transfer money through mobile phones, making mobile minutes interchangeable with money,” the report from the McKinsey Global Institute said. “The volume of online transactions has led to the emergence of new currencies, with the open source bitcoin recently crossing $1 billion in circulation.”
Last month, another report on payment technologies from McKinsey analysts focused on China.
“Consumers are adopting online and mobile transactions quickly, especially with major Internet payment providers aggressively pushing them. Moreover, the traditional payment infrastructure (including the use of credit cards and point-of-sale systems in stores) remains underdeveloped in China, which has created an opening for third-party Internet payments to make rapid gains,” the report noted. “The impact of virtual currencies such as Bitcoin and Tencent’s Q-coin in the Chinese payment landscape has been limited. Bitcoin is used mainly for speculative investment, while Q-coin is largely reserved for the purchase of virtual goods and value-added services from Tencent.”
While dismissing Bitcoin as a serious current contender in the payment space, McKinsey analysts are issuing a warning to banks regarding new technologies.
“Attackers are developing payments-service capabilities and operational skills superior to those of banks. They are not smarter, just more focused. Banks’ customer relationships, structural security, multichannel capabilities, and stability should ultimately combine to win the game. But banks will succeed only if they can match the solutions, operational efficiency, and client-service skills of attackers. And they must get there quickly. In the digital world, tomorrow is already too late.”
Written by Hal M. Bundrick