RATE Group | Five reasons why bitcoin fails the innovation test
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Five reasons why bitcoin fails the innovation test

24 Sep Five reasons why bitcoin fails the innovation test

Posted at 01:00h in Bitcoin News by

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Paul Volcker, former chairman of the US Federal Reserve, once said that the ATM was the only really useful financial innovation. Today’s entrepreneurs and bankers are looking to prove him wrong.

Mr Volcker’s view was far too gloomy. But given the flurry of fintech innovation — some of it potentially disruptive — we must think hard about what defines success.

There are five simple tests for a genuine financial innovation. Is it cheaper? Does it offer much better service? Is it faster? Does it democratise access? And what are its side effects?

Mobile payments, like exchange traded funds or debit cards, would pass these tests with flying colours. Mobile payments have cut the cost of a payment by up to 80-90 per cent in some emerging markets, allowing them to leapfrog western systems. Take Kenya’s M-Pesa: the value of payments on the network now represents almost half of Kenya’s gross domestic product.

Great innovations are also levellers. Mobile payment systems can…

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