DeFi or decentralized finance can threaten the world of traditional banking, because of the shift in lending, even DeFi itself is known to be able to provide loans like other traditional banks.
Cryptocurrency is not here to threat the traditional banking system. Defi is a different kind of lending which requires a collateral in the form of crypto. Can you take a home loan from a defi platform? Can you take a car loan from a defi platform? The answer is no!
Defi is here to exclusively cater the crypto community. It can't fulfill the need of traditional consumers and hence I don't see a threat to the banking system anywhere. Also it is not practical for anyone to move to complete crypto without the need of banking. Some exceptions can happen but largely it's not really a convenient mode of payment. So there's no competition itself.