Dear Mr Bank Manager,
This is not an easy letter for me to write. I have been a customer of yours for over 20 years. You were there with a loan for me when I bought my first car; you helped arrange the mortgage when I bought my first house, and you even helped me launch my first business. We have been through so much together.
And I’ll let you into a little secret?
You were my first! Don’t worry, I know I wasn’t yours. I think this is why this relationship means so much more to me than you.
You may not have noticed that our relationship has changed, you have been so busy since that big financial crisis that we are doing less together. I got my last loan from my supermarket as they had a better rate and my last mortgage from another bank. These days I am only using you to hold money for me and pay my bills.
We are like passing ships in the night and I am worried that if we don’t talk we might have to separate.
Recently I made this new friend called Bitcoin; a form of Cryptocurrency, I call her Crypto, you have probably heard of her. She is fresh and exciting, and I want you to get to know her too. I want you to make her part of our relationship.
I know I am neither a bank manager nor an economist and you have all these arguments for why Crypto will fail, but I am someone using Crypto in my daily life and I know that this is going to be an ever-increasing need for me, and I want us to share this experience.
I know you are scared, or maybe you just don’t understand it. Maybe you think Bitcoin is a Ponzi scheme and everyone buying it is only doing so to make a quick buck. Sure, some of us are, like some of us who bought shares during the Dot Com boom and lost money when it crashed. But look what happened after that, we got some of the most significant companies in the world: Amazon, Google and Facebook.
Look at the other cool things which happened too; Apple created these fantastic phones for us that do all kinds of cool stuff with the Internet. These devices do much more than making calls; they allow us to read books, access millions of songs, track our exercise and even find love.
I think you will agree that the Internet is pretty cool and the Dot Com bubble brought lots of capital and developers into the market to figure out how best we could use it.
The thing about Crypto is that it is doing the same thing; you may see it as a bubble or hear financial commentators saying it is such, but a bubble isn’t a bad thing. You may be hearing all these stories of scams and hacks but this bubble is also bringing capital, smart people and developers into Crypto to drive innovation. And don’t listen to Bill Gates, terrorists are using Windows too and as Naval said, a young Bill Gates would be building on the blockchain.
I know you have heard of the blockchain, you have heard it can do some pretty cool things right? But you are questioning whether we need Bitcoin, but it is because of Bitcoin we have the blockchain. We’re pretty loyal about this so you can’t have one without the other.
You may be wondering why we love Crypto? Firstly, I will confess, some of us have made some great money from it, I would be lying if this wasn’t a significant factor. We also expect to make money from it in the future, we can see how Bitcoin is changing the world, so some of us are going to keep investing in it. You see we need global currencies and we don’t trust any centralised body to run it, and because Bitcoin is decentralised it has solved this need.
There is little point in leaving all our money with you at the moment, I mean you did use to give us some interest, but that is pretty much non-existent now. Don’t think we haven’t noticed that you do still lend out our money to others for a profit, we don’t mind this, but do you share those profits with us? Not anymore.
There are other reasons we like it too. You see it has this thing called censorship resistance, what this means is that we can spend it/transfer it without having to give a reason, once we have created a transaction it has happened, and this is quite cool. Recently when I withdrew £2,000 from the bank, you asked me what it was for, you nosey bugger. I didn’t realise I had to explain myself to you and I don’t think the bank clerk saw the joke when I said I am a drug dealer.
The other thing with sending money with Crypto is that it is pretty damn quick, something you guys still haven’t figured out. I do appreciate the hard work you have put in providing me with the Internet banking, that is quite cool. I also love my mobile app, but let’s get some perspective, Amazon can send me a package across the Atlantic in an aeroplane quicker than I can send money across the Internet. I mean, come on, I know you don’t physically ship my pound notes across the pond, all you are doing is updating a database but yet I have to wait days and pay a fee for the pleasure.
The other thing with Crypto is that we get to hold it ourselves. I know we should trust you, but in England right now, you only guarantee to protect £85,000 of this. Yes, this is probably more than most of us have, but don’t we have a the right to all of our hard earned money being protected?
You may think that a problem with the banks is pretty unlikely, our friends in Greece and Cyprus would beg to differ because you started stealing their money to pay for their government’s mismanagement of their respective economies. And I doubt our friends in places like Zimbabwe or Venezuela have any protection at all.
Also, during the financial crisis, when you guys were playing the lottery with those funny derivative things we heard all about, a few of you nearly disappeared. Only when the government stepped in were we saved. Pretty hairy times right? You must excuse us for not trusting you 100%.
You know I got into Bitcoin mining recently because I told you about it, I spent three hours in one of your branches filling in all those forms and had to wait a week for a decision, I’ll tell you more about this in a moment. When I bought the mining equipment, it cost $70,000, after sending the cryptocurrency it confirmed in less than 10 minutes and cost less than $1. I have no idea how I would send that kind of money to China with you; I expect I would need a meeting, some documents and an interrogation, and who knows what you would charge me for that.
Remember I mentioned the bank account I tried to open a moment ago, you said no. I tried a couple of your buddies too, and they also said no. They said they can’t see where this money is coming from and I may be laundering it. A fancy accusation, especially as I have run multiple businesses and never once been convicted of a crime. Also, if you look into it, you have to be pretty stupid to use Bitcoin for crime, it is pretty easy to track where the money goes these days.
Clearly, I think you are scared, probably why your mate Jamie Dimon was so against it, though I think he is changing his view now.
Bitcoin isn’t going away; I am buying more, my friends are buying more, lots of people are buying more. If we see this as a better place to keep our money, then you are going to have less to lend out. What then? You are going to have to borrow from your competitors, and this is going to get a lot more expensive for you and you are going to make a lot less money. Maybe only a little to begin with, but I recommend you read Tipping Point by Malcolm Gladwell, the dude with the crazy hair. I’ve dropped a link in for you, sod it, I’ll buy you a copy if you want?
Another problem you need to think about is as it gets easier for us to buy things with Crypto, we are going to do more of this too, why? Well, it should be cheaper without those little % merchant fees you charge for all those people in the chain. Technology doesn’t like middlemen.
You probably think this isn’t a threat yet, similar to when some weirdos were getting DVDs sent to their house in the post when others were going to Blockbuster, but then streaming came and where is Blockbuster now? Also what happened to HMV, Tower Records and all those magazines and newspapers we loved? Many a corporate grave has been dug by those companies who have failed to innovate.
The infrastructure is changing, merchants are bringing out Crypto solutions, and before long you will see Pay With Bitcoin as much as you see Pay With Paypal. It took time for Paypal, it was a bit of a pain to begin with, but they persevered, and now many of us just use them, why? Well, it comes down to this thing called ease of use, creating an account on every website and entering your card details is hard work. A simple login with PayPal is so much easier.
If someone makes things easier or cheaper for us, we tend to use it.
When we get a simple login with Crypto and if the retailers pass on the savings from your merchant fees, then things will be cheaper. Yes, it might be negligible for a cup of coffee but a TV? A Car? A house? Then once we are using them more and more we might use them for a cup of coffee too. These fees are also relevant when travelling, and lots of us travel but have to pay all these expensive fees when spending money abroad. Our Crypto accounts are borderless so these fees don’t exist.
So if we aren’t saving our money with you and we aren’t using our debit and credit cards, then why do we need you? Everything else we can buy on the open market, there is no loyalty for mortgages and loans, we’ll get them from whoever is offering the best rate, that might not even be a bank, that might be our supermarket. We don’t care; we just want the best rates.
Are you getting the picture?
All these years of failing to modernise, thinking there is no threat to your model just isn’t true, is it? Our hero, Mr Satoshi Nakamoto has thrown a spanner in the works. You should Google him, he is kinda cool, though if you see some stuff about this guy Craig Wright, it isn’t him, don’t worry, he’s just some ridiculous man who pretended to be Satoshi.
I myself have been using Crypto for a while now, and something I have noticed is that there are a lot of young people excited by it. The same people who don’t buy CDs because they can just ask Alexa to play a song, the same people who don’t watch TV because they find what they want on YouTube. They have no interest in the complicated stock market, and they have grown up using virtual currencies when playing computer games. Sure, your grannies and granddads will probably still come to the bank to talk to you, but what about these younger guys and girls? You must have noticed some new modern Internet-only banks that the youngsters love, Revolut has even added Cryptocurrency buying and selling.
So I’ll level with you, you have choices, two as I see it:
But like when I ignore a bill, it doesn’t go away, by the time I deal with it, it usually costs me more, maybe a fine. I think you may have the same problem. Go and look at Circle, they just bought this exchange we use called Poloniex for $400m. I guarantee this is going to look cheap in a year or two. Like when Facebook bought Instagram for $1bn and then a few years later paid $19bn for Whatsapp.
The longer you leave it, the more expensive it will get:
I think we can agree it is inevitable that you will have to modernise and face up to the fact we want Crypto. Mark Carney isn’t going to be your shining knight, we all think he’s an idiot anyway. Once your customers start going elsewhere and you have less money to lend you are going to feel like the people who didn’t buy Bitcoin at $30, then $300, then $3,000.
I know you love digging up these yellow lumps of metal and then burying them back under the ground, but like John Pfeffer told me at lunch recently: “In 100 years when we are flying around in our Millennium Falcons, do you think we are going to be using lumps of yellow metal as a store of value?” You should read John’s white paper too, he is a pretty smart dude and you’ll soon realise that this isn’t just some made up magic Internet money.
We want Crypto, and we need banking services. Don’t worry; Crypto isn’t going to replace fiat money (apparently this is what £ and $ is, fiat money, I only found this out recently). I know there are some libertarians out there who say Bitcoin will replace money, but I also know the governments won’t allow this. Look at America, did you see the Senate testimony on virtual currencies? No? I reckon you should watch it, especially this dude Christopher Giancarlo, we like him, he understands us, anyway, if America wants in then the whole world will have it at some point. Even China!
The relationship will be symbiotic, we will use our pounds and dollars for some things, and our Crypto for other, and we will likely bank with whoever makes this easiest. You see, at the moment, you aren’t making banking easy, you’re making it a pain in the ass. You know recently you charged me £50 for going over my overdraft in one account even though another was in surplus. Yup! So even though I had no debt with you, you still charged me, this behaviour makes me think you are kind of a dick.
The only reason I haven’t changed bank is that I am so busy I haven’t gone through the process of writing down all those direct debits and things I need to move. I will though, it is on my to-do list. So you have some time but not a lot.
My advice is this, go and open a Coinbase account, they are not a bank, but they do look a little like one. Have a look inside there, you will see that they give you an account for your Pounds, Euros and Dollar and also accounts for my Bitcoin, Litecoin and Ethereum. All together, one big financial happy family.
Click on the accounts, and you can see that you can send and receive Crypto just like you can with a bank, but remember what I said earlier about speed and cost. The fiat ones are just for balances and buying Crypto, so not a threat to you yet, but could they be in the future?
Also, take a look at the vault, it is kind of like a savings account, though like you, we don’t get any interest. But what if Coinbase did mortgages and loans and used Crypto, well then maybe we would get some interest. Don’t worry; they probably won’t, the vault is just for security and most of us don’t keep much Crypto on Coinbase, just a little; I keep mine on something called a hardware wallet, buried in an underground bunker, with a moat, armed guards and alligators. You’ll learn about security pretty quickly when you get into this.
So Coinbase, pretty cool right?
It would be pretty cool, if when I logged into my bank account that I have a Bitcoin account next to my current and savings. You could probably give me better fees than Coinbase anyway. I would definitely buy and keep some Crypto with you because getting my money from my bank to Coinbase is a bit of a pain. Also, I think it will be much easier for you to add a Bitcoin wallet than Coinbase to provide banking services. To be honest, I don’t think they will ever offer banking services but I do believe a large bank will buy them one day. Probably for gazillions.
Does this all make sense?
See Crypto isn’t going away, and like my friend Gavin said to me: you can’t undo the blockchain, and you can’t divorce it from Bitcoin. I guarantee that if you aren’t looking at it then your competitors are. Why wait for them? Why not set the trend? Why not be that cool, innovative bank with Crypto? You won’t lose any customers by doing it, but you will gain some new ones.
I know this is scary but come on, the Internet was scary and you adapted, you finally figured out web and mobile banking. Don’t you think it is more frightening to ignore cryptocurrencies and face being left behind?
Love Peter x