The way people spend money is changing. The days of routinely paying for goods with cash or cheques appear to be numbered as most shoppers enjoy the convenience of chip and pin and contactless payment options.
Almost every shop, restaurant and trader, however large or small, now accepts some form of digital payment. Whether this be via card readers, online bank transfers or PayPal, the decline of cash payments has accelerated dramatically over the past decade.
Against this backdrop, it was almost inevitable that somebody would take digital payments to the next level and launch a digital currency
The rise of bitcoin – and particularly the technology that underpins it – presents an entirely new challenge to the financial sector, which is already playing a game of constant catchup to adapt to modern transactions.
This “cryptocurrency”, invented in 2008, is the world’s first decentralised digital currency. It is created as a reward for users who verify and record payments into a public ledger.
Bitcoin has been added as a payment option by Microsoft, while high profile companies such as car producer Tesla and travel agents Expedia accepting the new currency.
Transactions made in bitcoin are recorded in a decentralised public database called blockchain. This concept is at direct odds with the traditional method used by financial institutions to keep track of transactions.
Financial institutions are now beginning to recognise that the technology behind blockchain is more valuable than the currency itself.
Many banks are already looking into how they can utilise blockchain-style applications within their businesses, while IT specialists such as Microsoft are helping them create real use cases.
Banks have already ploughed millions of pounds into modernising their infrastructure as well as shifting focus towards delivering digital services.
However, established financial institutions will have to act quickly to keep up with this long march towards a fully connected digital world.
Many banks with legacy IT infrastructure will need to rapidly move to a cloud platform to be able to handle this new currency technology.
However, cloud providers must also move with the times to adapt to this new system. At present, cloud storage services are centralised, meaning that users must rely on solitary storage providers.
There is a growing feeling that a blockchain-powered cloud storage network could be established in line with this new technology.
So, as well as impacting the financial sector, the rise of blockchain also has the potential to have a seismic effect on the cloud storage industry.
It is now imperative that cloud storage keep their eyes firmly on how the financial sector responds to blockchain. How this situation develops over the next 12 months will define the future of cloud storage.
One thing is for sure, the financial sector cannot fail to react to this changing landscape.
Blockchain technology has the potential to address the future needs of the financial services industry, such as direct payments, security infrastructure and property registries.
The urgency in which banks must move from their old systems to the cloud is underlined by the emergence of new digital challengers, which have left the financial sector struggling to keep up with a rapidly changing playing field.
As well as the rising influence of Bitcoin, Apple recently launched its Apple Pay mobile payments service. Samsung are reportedly set to launch a similar service in the near future.
A major concern for banks is that large technology companies such as Amazon, Google and Facebook may start offering financial services to their huge customer bases.
This year will be a make-or-break period in establishing whether these upstart challengers can steal a march on established financial institutions or whether it will simply drive large banks on to significantly upgrade their legacy infrastructure.