A potential global financial crisis has certainly been a hot topic for a while now. Predictions have been made by many businesses, and another one recently came from the McKinsey & Co. consultancy. The company reported that most of the world’s banks are not prepared to survive a potential downturn.
McKinsey’s annual review of the financial industry says that we have entered the late phase of an economic cycle.
A significant decrease is experienced in the growth volume and top-line revenues, as loans show the lowest advancement in the last 5 years. Investor confidence in banks is declining as well, and the yield curves appear to be flattening. A senior partner at the firm noted:
“We believe we’re in the late economic cycle and banks need to make bold moves now because they are not in great shape. In the late cycle, nobody can afford to rest on their laurels.”
Moreover, the risk costs across the globe are at an all-time low. This signals that banks must renew their focus on risk management and factor in the increasingly digital world.
Another major sign can be extrapolated from the negative interest rates in lots of countries. Instead of receiving money on deposits, banks charge fees to their customers.
As CryptoPotato reported, such rates have been imposed across Europe – in Switzerland, Denmark, Sweden, Germany, and elsewhere. The Bank of Japan also implemented this approach a few years ago.
Even though interest rates in the U.S. are currently over 1%, the former chairman of the Federal Reserve believes that the country will soon follow suit.
The report from McKinsey points to technology as the way out of the potential financial crisis for banks. As most banks are considered weak, the company offers examples such as Apple, Amazon, and Google in the U.S. and Ping An in China. Fintech financial services have emerged over the last decade, capturing new business areas such as credit cards. Those companies allocate more than 70% of their budgets to information technology innovation, while banks allocate just 35%.
If technology is the way forward, Bitcoin should probably be considered. When it comes to inflation rates, for example, the largest cryptocurrency by market cap has a preprogrammed one of 3.7% which will drop to 1.8% next year after its Halving. It’s also a scarce digital asset with a limited supply that will only decrease from here on out.