IMF says banks could be "left behind" against Big Tech competition

According to a new study by the International Monetary Fund (IMF), banks must evolve to avoid the risk of being "left behind" as large technology companies disrupt the financial system.

Authors Tobias Adrian and Tommaso Mancini-Griffoli of the IMF, said Monday in an article entitled "The Rise of Digital Money" that the two most common forms of currency, cash and bank deposits, "will face a fierce competition and could even be out of date. "

But banks "are not likely to disappear" in the face of growing threats from large technology companies and Fintech start-ups, the paper said.

"Some will be left behind without a doubt," wrote the authors. "The others will evolve, but must do it quickly."

The research was published as central bankers and policymakers discussed the role that technology companies and digital currencies would play in the banking and payment system.

The announcement by Facebook of the launch of a cryptocurrency called Libra has sparked skepticism from many officials around the world. In a testimony before Congress last week, Federal Reserve Chairman Jerome Powell said that Libra raised "serious concerns" about privacy, money laundering, protection consumers and financial stability.

"Policymakers need to be prepared for certain disruptions in the banking landscape," says the IMF paper.

The IMF paper stated that traditional banks have certain advantages over their technology competitors, such as the possibility of raising interest rates on deposits. Libra, for example, said that it would not offer users any interest. But the paper adds that large technology companies and new financial technology companies are "experts in providing convenient, attractive, inexpensive and reliable services to a broad network of customers."

The IMF examines the role that central banks could play in issuing digital currencies. In an interview with CNBC in April, Christine Lagarde, then managing director of the IMF, said that financial sector disruptors, including cryptographic badets, "clearly have an impact" on incumbent operators, just like traditional banks.