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March 27, 2023   FinTech and Alternative Finance, Fintech International, Fintech Opinions, Stories   No comments

Twitter Generation’s 1st Banking Crisis is Different From 2008

CNBC | Hannah Ward-Glenton | Mar 27, 2023

Wikipedia 2007 run on Northern Rock - Twitter Generation's 1st Banking Crisis is Different From 2008

Image: Wikipedia, 2007 run on Northern Bank

The banking crisis today looks very different from 15 years ago thanks to social media, online banking, and huge shifts in regulation.

  • So how is it different?  Social media not only allows rumors to spread more easily, but also much faster.
    • "What social media has done is increase the importance of reputation, perhaps exponentially, and that's part of this problem I think," Donavan added.  Social media gives "more scope for damaging rumours to spread" compared to 2008, Jon Danielsson, director of the Systemic Risk Centre at the London School of Economics, told CNBC in an email.
    • "The increased use of the Internet and social media, digital banking and the like, all work to make the financial system more fragile than it otherwise would be," Danielsson said.
    • "There are a couple of tweets and then this thing [the collapse of Silicon Valley Bank] went down much faster than has happened in history," Fraser added.
  • While information can spread within seconds, money can now be withdrawn just as quickly. Mobile banking has changed the fundamental behavior of bank users, as well as the optics of a financial collapse.

See:  Digital Asset Experts School Senate Banking Committee Members on Silvergate Debacle

  • "There were no queues outside banks in the way there were with Northern Rock in the U.K. back in [the financial crisis] — that didn't happen this time — because you just go online and click a couple of buttons and off you go," Paul Donavan told CNBC.
  • Trust is key:  "I do not believe that [mobile banking] was the source of the problem. I think it was a lack of trust, of confidence in different banks, and that then contributed to this situation," Jordan said at a press conference Thursday.

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