Anyone who doubts why something like Bitcoin would be of use in banking should read the part about net settlement and counter party risk.
This article describes the system for moving money within one country but similar mechanisms exist for moving money internationally. Imagine the counter party risk involved between banks who are governed by different central banks in different countries half way around the world. Bitcoin removes the counter party risk in transfers by making settlement instant per transaction instead of net daily settlement in traditional banking.
The reason this is important is that these transfers revolve around credit and when there is a banking crisis and everyone suspects everyone else's credit worthiness then payment systems can break down.
Bitcoin would solve this, if it was actually used (or fit to be used) as intended - people keeping their own wallets and making on-chain transaction.
However, because it is so poorly designed, almost nobody does that, and instead store their crypto in exchanges. Which have all the downsides of banks (they can hold your money hostage) but none of the upsides (security and regulation).
It solves the initial problem of "how do I get my money out of the bank" because you ARE the bank (sort of). BTC doesn't directly solve the problem of liquidity, exchange to other currencies, etc. however.
Right. But this comes with the cost of having to wait several days to be able to transfer money, or having your account locked for triggering fraud detection, or extremely low interest payments on the profits the bank makes from loaning your money out.
Bitcoin has none of those costs, but you have to take on all the risk of getting defrauded. For some, especially people who understand security, bitcoin seems like the better deal.
Bitcoin provides stronger settlement guarantees than Ripple (as well as a host of other superior properties). Banks are fighting these technologies, adopting competitors which mirror existing business practices (as opposed to making them obsolete).
It seems not, since currently Bitcoin transactions are uncompetitive (slower and more expensive) compared to Fedwire (or EU equivalent Target2) settlement systems.
We already have fast, safe and cheap electronic money settlement systems, the only issue with getting them to consumers is that the unregulated lack of competition (in e.g. USA financial services market) enables charging extreme markup. If you want immediate and cheap money transfer to me, the traditional banking industry is capable of providing that right now, it's just that they don't want to - the technical problems are solved (without needing a blockchain), it's just the question of competition. And, coincidentally, that's a big limit for alternative payment channels - as soon as any one of them actually threatens the current status quo, the banks can and will simply cut prices and reduce delays to undercut the new thing, and still earn a profit from payments.
The reason that full-on banking solutions are more expensive to provide is because storing money is a tiny part of what banks actually do.
The primary business of a bank is extending credit. Of course it's easier to build a wallet app then run a bank - the former's scope is orders of magnitude smaller.
It (and also the role they play in wealth management and fraud prevention) is why banking devours such a large percentage of our gdp. It's not going to be replaced by another Bitcoin fork.
This feature is the whole point of Bitcoin and blockchain in general. If we just wanted to be able to have balances in banks, the current banking system does it far cheaper with a lot more legal protections.
Making intra-bank transactions more efficient is one; the floor of money transfers will be both cheaper and faster. Wire transfers are expensive and can be very slow (sometimes more than a day) for example. Bitcoin being a real transaction mechanism between institutions that is cheaper than wires and faster than wires (works on Sunday!) puts pressure on the banks to either compete or adapt. Another example is enablement of micro-payments (perhaps on side-chains) where conventional money transfers don't scale well - someone, not your (artists) preferred broker, is holding your money until it aggregates up to a transferrable sum. Now there's pressure to make that sum smaller and the transfer frequency greater.
And, although not everyone needs this, for those of us that have been in the situation of doing international money transfers, they are a huge pain, unreasonably expensive, and slow too. Bitcoin puts pressure on all this, and I believe we're already seeing companies pop up that offer transfers in your preferred currency but are using Bitcoin behind the scenes to settle the transfers.
But banks provide credit which Bitcoin does not. Most of the problems with banks (bank failures etc) comes from the credit side, not the payments side.
Cheaper than bitcoin? I'd love to see your calculations of how Bitcoin is more expensive than the existing banking structure, including the cost of staff, buildings, etc. The banking bureaucracy is massive.
Furthermore, there is plenty of criticism that could be levied upon central banking, financing wars between nation states being chief among them. There's an enormous social cost to central banking.
So, what advantages does bitcoins more expensive solution to this problem give us?
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