The bitcoin lesson for banks: come to terms with digital payment networks - or else

THE systems the world uses for transferring money - vast, sprawling, complex and costly - are ripe for change. And change is coming, in the form of distributed ledgers, digital signatures, and virtual currencies. Banks, the traditional intermediaries in the movement of money, must now move quickly to figure out how to deal with this technological threat to their business.

Some US$300 trillion in transactions flow through international transfer networks annually, generating US$150-200 billion in revenues for the banks, Bain & Company estimates. It's not hard to see why banks would be slow to alter a system that's been such a steady source of fees.

Given the enormity of what's at stake and the spotty track record of digital currencies, it's understandable that banks would want to proceed with caution. In early August, for example, Bitfinex, a Hong Kong-based exchange where bitcoin is traded, was hacked, resulting in the theft of about US$65 million. Bitcoin is underpinned by the blockchain, the best known distributed ledger.