A major financial shift will allow you to save money without a bank

Peer-to-peer lending, namely Bitcoin and other complementary currencies, are challenging the dominance of big banks.

The banking sector has received a lot of complaints from all walks of life over the past decade, so the industry is in urgent need of change and adjustment. Last month, the governor of the Bank of England said that the pain suffered by the UK financial sector was due to serious problems in the market, but some people emphasized that it was due to the monopoly of the UK's five largest banks, which were too large to fail or close, but too large to serve customers well.

Changing the system from within is one way to do it, for example turning the Royal Bank of Scotland into a network of local banks is a good approach.

But there is also a second transformation taking place, coming from outside the financial structure, a shift that is not only designed to reduce costs for businesses and prices for consumers, but also to bring in more service jobs and opportunities than banks’ competitors could have anticipated.

By combining the latest technology with age-old practices that currently cover all areas of banking, new practices are emerging that will surpass all previous practices. In short, it is now possible to make deposits without a bank. Here are the specific practices:

1. Peer-to-peer credit

Over the past few years, the industry has become a poster child for innovation in financial services, and now it has been recognized by regulators and the market. Banks like Zopa, RateSetter, FundingCircle, etc. are entering a new field where most customers are at the core of their business: providing savings options and facilitating investments.

On the savings side, customers who manage their money through P2P platforms will receive similar tax breaks from April 2016. On the investment side, even platforms like RateSetter that previously focused on personal loans are gradually moving into business loans. You might not expect these platforms to offer lower interest rates, but they do aim to outperform traditional banks by turning over applications faster. In addition, through more in-depth and personal case analysis, these platforms can also provide loans to small businesses that big banks would never bother to lend to.

2. Innovative payment methods

Currently, most of our transactions are handled by private units owned by large incumbent banks. This keeps them in a gatekeeping position, effectively preventing them from investing in and upgrading technology and terms to match the speed and convenience of 21st century services that customers expect, while also costing them dearly due to a lack of transparency to users.

Even if banks want to change SMEs, such as credit unions, building societies and new competitors of banks, banks must purchase existing systems. The industry is ripe for the times, and a series of related platforms are filling the gaps of traditional banking and saving customers a lot of fees.

Palpay, TransferWise and others focus on convenience for customers, but they still link to the back end of traditional systems. Other platforms are developing new tracks. The small and innovative Brixton Pound allows mobile payments on the high street to be completely independent of smartphone applications, and of course Bitcoin still has some new developments regularly. Last year, the University of Cumbria announced that its students could use electronic currency to pay tuition fees.

However, the hype around this extremely volatile currency has also given way to other companies that focus on the benefits of the underlying technology: allowing account holders around the world to transfer money without going through a middleman. Although large banks are providing incubator facilities and capital to entrepreneurs trying to catch up with the new platforms mentioned above, the latter remains a highly risky but promising start-up industry.

For centuries, Islamic merchants have made it possible to pay without banks through the Hawala network. The Internet will definitely bring direct financial connections (banklessness) to all industries and individuals as we have said. A good example is that virtual currencies Ripple and Stellar have become the darlings of Silicon Valley.

3. Create new currencies

The fact that money can not only be moved between banks, but can also be created when loans are made, is a surprise to many. To the extent that peer-to-peer lending and payment services can only use money that is provided by banks, a third set of innovative solutions is needed at the local and national levels to fill the gap when economic liquidity is reduced.

Complementary currencies can achieve the above goals at almost zero interest. These complementary currencies are only valid for companies that sign up to their cooperative credit network, and they are usually not exchangeable for national currencies. The WIR-franc has been operating in Switzerland for more than 80 years and serves nearly 50,000 companies across the country. The French city of Nantes has just launched Sonantes as a way to support the better operation of small and medium-sized enterprises in the region.

The two companies in the above examples happen to be run by banks - the cooperative in WIR and the local public bank in Nantes, both of which provide services to customers in conventional currencies, and do not require a banking license to issue complementary currencies anywhere. Cooperative credit systems are usually operated by formal service companies outside the scope of financial regulation, and some of them are publicly listed companies that operate their businesses internationally, such as BarterCard, which also has operations in the UK, but its main focus is on a specific city or region. International trade body IRTA (International Swap Trade Association) is a representative of the US industry. It was established in 1979, but in fact its business is more global.