Financial Institutions Find Value in Bitcoin

Despite temporary setbacks in hacking concerns and price stability, bitcoin is quickly becoming mainstream, and financial institutions are taking notice.

Banks have begun to take notice of how cryptocurrencies are able to move money cheaply and quickly, legitimizing it in the eyes of large financial institutions. JP Morgan even sent in patent applications for its own version of a digital currency closely resembling bitcoin late last year (which were rejected).

Bitcoin’s software works by making a public record of transactions.

Payments made with bitcoins are almost immediately registered and recorded which means that the same bit of currency can’t be duplicated. Transactions are verified by the use of computers who are then awarded new bitcoins — the basis of bitcoin mining.

Fiserv, a global provider of IT management and e-commerce systems for the financial services industry is considering ways to replicate bitcoin’s open ledger system to move funds securely across its network.

While the use of the cryptocurrency itself may not be implemented, the underlying design of encryption involved in transfers could be the next innovation for major banks to compete in the near future.

Credit cards and international wire transfers may soon find themselves out of business thanks to the information technology that bitcoin utilizes. Payment systems that don’t clear immediately and come with fees are quickly being supplanted by mobile money remittance services, and slowly, digital currencies.

The cloud of doubt cast over digital currencies surviving government regulations may put online monies like bitcoin out of service, but its technology may be what survives the aftermath.

As financial institutions come to realize the value of this new technology, current systems like Automated Clearing House (ACH) fund transfers may soon be replaced by public ledgers used by bitcoin and other digital currencies.