An interview with Prof.Dr.Gilbert Fridgen, Professor of Business Computing and Sustainable Management of Information Technology, on the fundamental evolution of finance for consumers, financial institutions and governments.
Germans love their money.Will they still have to adapt to its abolition? I do not think that will soon lead to a suppression of the species.
For the economy, however, cash is an expensive thing.If it puts more emphasis on electronic payments, increases user comfort and, at the same time, their confidence in cashless payments, it will automatically prevail.
Could the emergence of cryptogeld be described as the biggest revolution in the payment system since the invention of coins and paper money? The biggest revolution has certainly been electronic payments.Cryptographic currencies are practically only a new hybrid form between cash payments and electronic payments because you have the electronic money on your own wallet (a kind of digital wallet / d.R) in your own availability.It is no longer subject to the access of a bank or other intermediary, which is of interest to some customers.
Nevertheless, I am not yet convinced by the usual crypto-currencies.
Why? In addition to Bitcoin as the oldest digital currency, there are now many more cryptographic currencies.Do not you think that’s relevant? Digital currencies were first introduced with Bitcoin in 2015 and 2016.At that time, many imitators were born with small technical changes and a new name.These crypto-currencies with few participants still exist in part, but they generally have values somewhere in the order of one hundred or the euro.
They are not really relevant.But Bitcoin itself is not without problems.
It should be noted the extremely high volatility of the bitcoins value, the extreme highs and lows.How much real hope, how much illusion lies behind the hype surrounding the crypto-currencies? I think a mix of both.In general, I see the potential of crypto-currencies, particularly Blockchain encryption technology and automation, that can be realized by this technology, including the payment function.
An example: in the future, an autonomous electric car installed in a charging station can pay the charge directly in crypto-cash without the payment process being executed via a central system.Because of systemic risks, we should not make our mobility system dependent on the communication system or the financial system.The potential of blockchain-based payments is huge.The question now is whether the customer will keep his balance on his personal wallet in a cryptocurrency such as Bitcoin, Ether, Libra or simply in euros.In my opinion, the euro should prevail here.
Why do you think that? I think that in the long run, central banks will issue cryptocurrencies and that there will also be a digital euro, driven by the demand of the economy.
The Swedish Reichsbank – which had already issued the paper money in 1661 as the first bank – is already testing whether it will issue the Swedish krona as an electronic crown.I can only consider bitcoin as a reserve currency, because its independence from the states makes it look like gold as a long-term investment.I doubt that Bitcoin is widely used as a means of payment in Europe.
On the other hand, talk about the production of energy-intensive Bitcoin.
Why does China want to ban even what is called crypto-extraction? The high energy consumption mainly concerns Bitcoin, where the production technology no longer corresponds to the current state of the art.There are already much more effective procedures.In addition, cryptocurrencies can be established without extraction if they have been issued by central banks.It should also be remembered that this technology would replace other payment systems.It would therefore be necessary to counter the current use of energy by payment systems: bank employees now drive to their place of work, the construction of which also cost 39; energy.When parking, they pay at a vending machine that must print and maintain the tickets.
They do not need it anymore when they pay with a cryptocurrency.Even if the energy consumption saved is difficult to calculate, one must always consider the overall balance of alternative systems.
So black, I do not see the subject of energy consumption at Blockchain.
Nevertheless, opinions differ as to which side of the encryption field radiates the loudest.While defenders praise financial self-determination and bank independence, critics point to the problem precisely in the uncontrollable nature of digital currencies or their use.How much are you critical for the negative potential of consumers and the state? Virtually all technological advances can be used for better or for worse.Open crypto-currencies like Bitcoin, which boast of being non-regulatory, do not seem to me desirable from a societal point of view.
The ultimate aim of the regulation is to prevent market failures.
With the widely announced new Libra encryption currency, the social platform Facebook is also becoming a global, even important system player in the financial sector.Is there a new world currency, controlled by a private company? In principle, Libra is less a digital currency than a payment service and money market funds with normal currencies in the background, such as the dollar, the euro, the yen or the book on which one can buy shares.The Balance system is operated by an industrial consortium.In fact, one may wonder under whose control the system should be put in place in the long run.
For now, I also consider that data protection is a problem.At the moment, I do not yet see how the system should be compatible with the European General Data Protection Regulation.
Bitcoin or the Balance of Facebook should they not be better banned? I would not recommend it either, as this would allow rapid break down of innovations in Europe.
When there is a clear need for business and society, a state should look for ways to provide legal alternatives.Think of the music industry twenty years ago, which had long tried to prevent the sharing of MP3 and MP3 files.The piracy was then blocked by legal alternatives, starting with iTunes, that is to say by a comfortable offer of music download from the net.If, for example, it is now necessary to use crypto-currencies to load cars on the electric column, we must find legal ways to do so.
But the money does not concern music, but the sovereignty of the state and ultimately a society that works.The industrial consortium behind Libra is actually starting to occupy a position in which central banks generally act as democratically legitimized institutions.However, I do not think that the main objective is to attract Euro masses into Libra and build it as the dominant currency.On the contrary, this consortium is more likely to attempt to reach the so-called “unbanked” with currency and bank issues – even competing with the Chinese offers WeChat Pay and Alipay.
Banks can hardly like this reorganization of the financial sector.
How do you see the future prospects of financial institutions? Basically positive, if you follow the digital transformation.However, many banks are lagging behind.The financial services sector sometimes has extremely obsolete systems and must now invest a lot.It will take a while before reaching a level where he can drive his own innovations.However, banks currently have promising approaches to position themselves as platform providers for FinTech companies.Conversely, Facebook could in no way offer a complete portfolio of banking services overnight.Nevertheless, we see that companies outside the sector are increasingly integrating into the market.
Which sectors of activity and, consequently, which banks are worried about the vigor of their activities, will show it.
Concrete future forecasts are even more difficult than crypto-extraction.But how do you think the finances will evolve, especially the banking sector? While lending, asset management and corporate finance are likely to remain at the heart of banks’ concerns, their business models will change.Incidentally, I do not think Facebook will embark on wealth management or corporate finance, but I imagine that the availability of user data allows for new business models.Banks depend on the knowledge of their customers.High tech companies have the advantage of being able to make more specific offers.Banks must be careful to stay in touch with their customers.
How could this look in practice? For example, if Facebook or Google stems from my activities and I’m thinking of building a house, he can resell this information to the main provider of financing products.So it may be that the financing of the house is always settled by the bank in the end, but between the two is suddenly an intermediary.At the bank, the bank pays, so to speak, the commission that the bank advisor cashed earlier, because he knew his clients well and knew if he intended to build.
In comparison, today’s banks know too little about their customers: personal banking tips have become too expensive, digitization has invested too late and is too unstructured.
There is a lot of catching up to do here, but nothing is lost yet.■
Teacher.Dr.Gilbert Fridgenis Professor of Business IT and Sustainable Management of Information Technologies at the University of Bayreuth and Deputy Director of Business Information Systems of the Project Group at the Fraunhofer Institute for Applied Information Technology (FIT).Post navigation.
