Have our global banking and financial systems hit their Uber moment?
by Antony Abell, CEO and co-founder of TPX Property Exchanges Group
Are our global banking and financial systems, as we currently know them, now under threat of a global extinction event by the speed, transparency, trust and efficiencies of our new blockchain and AI technologies? Is the increasing global public demand for better systems and processes that can better protect their money (‘stored labour’) in a high inflation global cycle now reaching a crescendo that will enforce change in our global systems?
This is not the first time that global change has hit an industry. During the late 90’s and early 2000’s the global Telecom industry experienced a fundamental change in its business model due to technological advancements around VOIP (Voice Over Internet Protocol) and consumer demand. This also happened in the taxi industry with ride-hailing firm ‘UBER’ over the 2009–2023 period when it challenged, and forced change, in the technologies and business models used by existing licenced taxi companies across the globe.
In the telecom industry voice (telephone calls) had been the primary revenue generator for telecommunications companies such as British Telecom (‘BT’) for more than 100 years. Telecoms was at that time protected by a series of monopolies originally created to deliver a universal service.
When VOIP then arrived in the form of Skype (and commonly now used for direct calls in applications like WhatsApp or Signal) this disintermediated the principal call revenues of the incumbent companies of that time and drastically reduced their ability to drive revenues from their existing infrastructure.
At their inception monopolies that protected new public services often made sense for the creation of homogenous services but it then often leads to a stagnation of innovative services for the consumer, while creating or encouraging inefficiencies. It can then reduce new capital expenditure on the existing infrastructure or in creating new products while the companies who held these monopolies sought to maximise their profits for shareholders. In many cases such behaviours ultimately caused a reduction in the very global competitiveness of a number of nation states and/or the industries (and the companies) where such protections were in place.
Uber had the same challenges 20 years later when it challenged the licenced taxi monopolies that operated in many countries. In the case of Uber, with their better technologies, service levels and reduced costs, it was immediately seen by the taxi-using public as a better, faster, more superior service than those provided by the incumbent, monopolistic, taxi services.
Consumers then moved en masse, and the rest, as they say, is history with Uber now operating in 10,000 global locations with 64 billion trips and 5.4m drivers in 2022 (it is noted here that many taxi firms then subsequently adopted some of the same new technologies and then competed directly).
Current global banking
In a similar fashion, the current banking industry and its underpinning monetary infrastructure, are both now being forced to fundamentally update their design, business models, thinking, technologies and regulation due to the increasing global adoption of new, faster, more efficient and more equitable financial technologies and monetary models.
These new models are being driven by the greater awareness and realisation of the consumer as to what ‘banking’ and unbridled leveraged global debt has historically done, and is currently doing, to the value of their stored labour in the form of the value of their ‘money’.
This transition scenario is exactly the same as BT and the taxi industry experienced over the last 30 years but it is now being played out faster and on a much larger global stage than historically experienced in these models (or before in human economic history) due to the current globalisation of our banking and financial systems and our relative addiction to short term thinking and profits over longer term design and value creation.
None of this is in fact new. ‘Money’ as a monetary technology has long been the primary tool for revenue generation and has been used for political and economic control by monarchs, governments and their banks (money lenders in all their various forms) over the last 2,500 years. Just as in the telecoms industry and taxi industries examples above, ‘money’, and the systems that support the use and distribution of it, have been initially protected by the state in order to deliver a ubiquitous service across the whole of a nation state and increasingly across the global economy.
This makes sense where a nation state fully understands its systems, policies and it is operating in the very best interests of its public. This singular point of nation state control of money does not however make sense when the state does not operate in the best interest of all of its people and when it no longer delivers the intended value or services to the greater proportion of their populations that they were democratically appointed (mostly!) to serve.
It also does not make sense when there is no single point of responsible global control. Banks making their own rules for themselves is not a responsible single point of control or authority that has the best interests of the public at its heart.
The more recent ability of the commercial and retail banks to subsume the nation states’ monopoly in the creation and control of the money supply by creating their own ‘ledger money’ (using fractional reserve regulations and ratios that they themselves helped to create and then police), alongside the global consolidation in the banking industry, has led to an ever smaller number of service providers providing fewer and fewer of the competitive services that the consumers are increasingly seeking.
In a largely unintended effect the global banking and financial systems have increasingly become a money creating monopoly run by the few for the few while still affecting the many and the future generations of the ‘many’. This can be largely evidenced by the largest ever recorded global shift and aggregation of wealth and assets where the poorest 50% of the world’s population now owns just 2% of the total net wealth and the wealthiest 10% of the people in the world own 76% of the total wealth.
The creation of bank ledger money and the nation states’ increasing ability to both create and lend money to itself in the interest of its own interests has led to the current high levels of global monetary inflation (inflation is classically defined as ‘too much money chasing too few goods’). It was not solely Putin or the energy prices as governments would very much like us to believe.
To support this unauthorised overdraft or ‘spending on your behalf’ our governments use the money (and taxes) of future generations to pay for the decisions of our political systems today. In doing this they increase the monetary inflation that impoverishes most of us as well as impoverishing our future generations by stealing their future labour, via the hidden effects of inflation and taxes, to pay for the debts of today.
Predictably consumers are increasingly becoming aware of this, if not in cause then certainly in effect when they pay for their food or utilities! As a result consumers are increasingly seeking more common access to ‘inflation resistant assets’ and ‘inflation resistant money’ derived from digitising or tokenising real world intrinsic assets or by accessing the restricted supply of extrinsic value crypto assets (digital asset ownership has increased to 9% of UK adults and 91% are aware of them).
As can be seen from this increased global interest and participation in the digital asset economy global consumers are seeking assets and investment services that can protect them (and their stored labour/wealth) from the wealth destroying effects of inflation.
Many of the incumbents in the banking and financial services are not offering these products or services to the broad base of consumers because they are either restricted from doing by their regulators or by their existing banking relationships.
It is not in many of the legacy financial industry’s interests to offer many of these products or services so they, like the telecoms and taxi industries before them, seek to protect their existing revenues, infrastructure and their capital investments in them by using their market dominant positions and existing regulations to block new entrants to the marketplace.
By any definition restrictive banking and financial services do not serve the ‘free and fair market’ operating conditions that the consumers want and increasingly need and that most regulators are also mandated to encourage in the public’s greater interests..
Like the VOIP and Uber models mentioned previously the new financial offerings and services are increasingly being offered on a global scale by nearly any entity to nearly anyone in a globally distributed model. Some of these are very good services and genuine products offering real value but some, to be very clear, are not. A degree of regulation is useful but consumers and the markets are increasingly getting better at choosing for themselves where to safely store their labour (money) as well as choosing the services and returns that they want for their money.
As stated, this is not new. History is littered with ‘VOIP and UBER moments’. When they do occur at scale however there were often sudden changes in the monetary tools that the consumer can then choose to use and the political systems that enable them. Gradual evolution to something ‘better’ is a positive Darwinian choice. If the new tools are chosen well then inflation can be increasingly removed from the global banking and financial systems as can be evidenced over history:
A salutary lesson from history for all monarchs, governments, central banks and financial systems is that it is ultimately the consumer (or the voting public) that will finally choose which form of trusted money that they will store their labours in or that they will then choose to use in common exchange. Often it is not their governments or armies that choose for them as governments and armies are also the same consumer or public. In the current cycle of global inflation this choice may increasingly be for many for the food and shelter that the current financial systems (with their historic monetary choices) can no longer affordably provide them with.
As history shows, as the exigent requirements of the hierarchy of needs (access to food, shelter and energy) increasingly affects a society then the ‘money’ that a society then chooses to use may have nothing to do with the form of ‘money’ or ‘currency’ that their banks, governments, tax authorities and regulators will want them to use (or in extremis may try to force them to use).
As with the telecoms industry and VOIP, or the taxi industry and UBER, the larger question remains for all of us: Should we not as regulators, banks, financial industry executives, entrepreneurs, governments and consumers, with the greater interests of us all, not now be eagerly grasping with both hands the innovation and new thinking of the new digital asset economy? Should we not now all accept a lower degree of self interest and short term thinking to build a better economy in the better interest of us all and of the generations that are destined to follow us?
‘Value’ in this context does not always need to be measured in short term pennies and cents… it can sometimes just be measured in common ‘sense’ and a better design for a better, more sustainable, common future that enables broad individual wealth rather than destroys, or aggregagtes, it.