Can apps replace banks?

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We certainly have seen apps replace many of our traditional everyday processes over these past few years in particular.

Where once we used our Melways for in-car navigation or went window shopping in a literal sense, now a growing majority of Australians flock to digital alternatives to these processes as a means of enhancing their days in isolation.

COVID-19 lockdowns also saw many older generations turn to mobile banking for the first time in their lives. With this shift into financial technologies, the role of apps in everyday processes began to feel increasingly complex.

This brings us to the question that we'll be unpacking today: can apps truly replace traditional banks?

Providing a thorough answer to this question will require a deepdive into decentralised finance (or DeFi) and an understanding of cryptocurrencies and the blockchain technologies that make crypto trading and transactions possible.

In order for finance to be decentralised, there needs to be financial resources that aren't controlled by world banks. This is why cryptocurrencies were first developed. Followed by the inception of Bitcoin and other cryptocurrencies came crypto trading platforms like Coinbase, Binance and Elbaite, developed by Melbourne app developer DreamWalk.

Often also referred to as crypto wallets, these crypto trading apps allow online investors to easily keep track of their investments in cryptocurrencies across multiple blockchains.

Of course, there are substantially more blockchains out there now than there were 10 years ago, and as such, crypto wallets are rapidly becoming essential apps for all digital and traditional investors alike.

Although the most popular crypto wallets do tend to cover a variety of different blockchains, it's important to note that there are different kinds of crypto wallets for different types of data stored on blockchain aside from traditional cryptocurrencies, like NFTs for instance.

Short for non-fungible tokens, NFTs are basically non-interchangeable units of data stored on blockchains that are generally in the form of a .jpg or video file, although even some audio files have been sold as NFTs.

Due to the fact that NFTs are characterised by visual or audio files, NFTs have grown to become a highly lucrative method of monetisation for emerging and established artists who are looking to make a living online.

With the introduction and widespread embracing of NFTs, crypto trading platforms have rapidly become less a fixture in the back pockets of investors, but also vital apps for independent makers and content creators online.

So digital investors have one-stop shops for investing in cryptos as well as keeping track of all their various blockchain investments, all thanks to mobile apps.

But how have mobile apps also helped investors keep track of their more tangible assets and traditional investments?

This is where mobile banking apps and digital banks come into play. Whilst many brick and mortar banks do have their own banking apps to complement their in-branch services, there have been a growing number of solely digital or online banks which do provide Aussie consumers with the opportunity to join banks that may likely offer lower fee structures and higher interest rates in lieu of traditional in-person customer service.

In the wake of the COVID-19 pandemic, however, all Aussie consumers were forced to adopt digital alternatives in order to see to their finances on a daily basis.

Mobile banking apps were updated and optimised to suit a greater variety of consumers, and brick and mortar banks expanded on their digital offerings, alongside offering consumers fee relief and additional support schemes to offset any financial strain caused by the pandemic and ongoing lockdowns.

Most brick and mortar banks prioritised providing fee relief schemes for business clients over independent consumers, which prompted many Australians to compare their banking arrangements and search for competitive offers, which naturally led many to digital or online banks.

As a result, younger Australians like millennials and around 38% of Gen Z-ers, are opting for mobile banking alternatives over brick and mortar banks, as a means of building their savings at a younger age and removing the need to visit physical banks in order to stay on top of their finances.

Whilst individuals don't necessarily need to visit banks to do their banking anymore, it's highly unlikely that all banks will become decentralised, as DeFi was designed to be an alternative to traditional banking services.

What is clear, however, is that DeFi will be here to stay, as it fuels a global digital economy that is both occupied and sustained by many. DeFi is fueled by participation, and participants who engage with all that blockchains have to offer, will be able to experience some return on their investments.

There's reason to believe that DeFi won't just be a valuable asset for independent investors alone, however, and that small to medium-sized enterprises (or SMEs) will also be able to secure themselves additional revenue streams through utilising blockchain technology and investing in their own smart contracts, these being the lines of secure code that map out crypto transactions and ensure the legitimacy of your digital assets.

Of course, even with the security behind blockchain technologies, not all independent investors or business operators alike will feel comfortable maintaining a digital portfolio or offering their services online to be redeemable through crypto payments, as fraud will always be an issue, even in traditional banking arrangements.

The difference with fraudulent payments in traditional banking systems is that your bank will always be held accountable to an extent, and so individuals and organisations alike may feel a firmer sense of security when banking with these established brick and mortar bodies.

Australia has been finding its footing in the fintech sector a little more over the past few years than ever before.

As digitisation initiatives were rapidly becoming front and centre for a plethora of industries during the peak of the COVID-19 pandemic, many more Australians are growing open to the idea of adopting purely digital alternatives for all of their everyday processes, whether it be for the sake of convenience or as a means of supporting public health even post-COVID.

The answer to the question we've explored at length today is quite simply no. It's unlikely that apps will replace banks entirely, and this will continue to be the case for a number of reasons, including the energy consumption of the servers that cryptocurrencies are powered by as well as a consistent lack of awareness and thus, a distrust surrounding blockchain technologies and the security of smart contracts.

Will apps and DeFi continue to provide online investors and other individuals with investment opportunities, both in crypto trading as well as in the form of monetising their work online?

Well, yes. DeFi will likely continue to play a major role in the formation of a globalised economy that citizens from all corners of the world are able to participate in.

Similarly, digital or online banks will continue to provide savvy consumers with personal finance options that may at times offer competitive advantages over brick and mortar banks in lieu of their additional in-branch services.

Apps won't replace banks entirely, but they will do as they have always done: provide a digital alternative for individuals who want the freedom of choice.