A library of snippets
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Let’s start with this: 25% of U.S. households are either unbanked or underbanked. Half of the nation’s unbanked households say they don’t have enough money to meet the minimum balance requirements. 34% say bank fees are too high.
From Fintechs Are Zeroing in on Everything Big Banks Aren’t | by Scott Galloway | Jul, 2021 | Marker:
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Square is well-positioned to become a significant lending business with its Industrial Loan Charter (ILC). Its lending product is quite unique in that it takes a percentage of daily card transactions (meaning you pay more when you have more sales). Sort of like how revenue-based financing works. It’s this sort of user-centric feature that a bank would never dream of rolling out. They’re slowly backing into banking from being a Fintech company (e.g. they still use Sutton for debit cards), but over time, they can gradually reduce their reliance on partner banks.
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Community banks (with sub $10bn in assets) benefitted significantly from the Durbin Amendment. Banks like Bancorp, Celtic, Evolve, and Sutton sponsors some of the world’s largest companies’ debit card programs (like Doordash, Instacart, and even Square).
Last year a16z published a piece showing the community banks that are partnering are trending towards a much higher Return on Equity (ROE) and Return on Assets (ROA). Some of the smallest banks in the US serve the largest tech and Fintech businesses and benefited from their growth.
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The future of money fascinates me. Where does it go next? Money has followed a steady trajectory from atoms, to atoms about atoms, to bits about atoms and then nothing more than bits that can shift in an instant, anywhere and everywhere. This idea that money, being nothing more than bits, would be switched instantly from person to person around the world is not a new one, forged in the Internet era. In fact it goes back to the very dawn of the information age.
Writing in the New Scientist magazine in 1963, in an article on “Computers and Money”, R. Sayers talks about 1983, forecasting that “Of course, at this stage, transfer of money would be completely automatic; the payment of a birthday fiver from an uncle to a nephew merely a matter of direction and timing of electronic impulses.”
Now we all know that this didn’t happen in 1983, nor for that matter in 2003, but I think we can all agree that by 2023, in much of the world we can see a digital era around us. Why? Not because of Bitcoin or smart debit cards or PayPal, not because of government policy or the banking system or social engineering, but because of… as it turned out, the mobile phone. That is the key technology. There’s no need to harp on about it here, but the ability of mobile phones to act as terminals as well as “cards” is the key reason why cash replacement is underway, which it wasn’t in 1995 no matter how cheap Mondex cards were.
A decade back, I was reading New Scientist magazine over breakfast when I came across an article on “The Next Wave” (14th May 2011, p.30) concerning the seven key technologies that the magazine said would shape the next decade. I thought it might be interesting to see how the last 10 years have treated these technologies:
Robotravel(telepresence with machines)
Augmented cities (location plus augmented reality
Evolved intention (R&D using genetic algorithms)
3D printing was spot on. I heard a speaker once talking aobut this (I am embrassed that I can’t remember who it was) saying that 3D printers would be like sewing machines in that most houses would have one but only one person in the house would know how to use it. Spot on. We have a 3D printer in our house.
Brain-machine mergers (I can’t wait for my exo-cortex) are coming down the track if Mr. Musk has anything to do with it.
Text mining (using twitter instead of market research). I don’t know enough about market research and such like to
Digital wallets. This is what caught my attention
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Oddly, the continued fall in cheque usage did not, as you might imagine, serve to reinforce the goal of the national payment strategy set back in 2008 to end cheque clearing in 2018. Instead, under pressure from nutty newspaper columnists, egregious elderly whingers and complaining charities, the Payments Council abandoned that goal and determined to keep cheques for as along as people want them (and can force other people continue to pay for them). I thought that in the light of this decision, the Payments Council and the Treasury Select Committee might be interested in an alternative paper-based cheque replacement scheme: the deposit-cheque.
The deposit-cheque scheme works in this way. Customers are given books of cheques that are preprinted with a maximum amount and protected with a simple anti-rewriting mechanism such as perforations with the same amount on them. To avoid the problem of cheques bouncing and the uncertainties related to clearing (and to obviate the need for any form of replacement cheque guarantee card) the value of the cheques given to any customer is against money that is held in an interest-bearing account for them. So, for example, my Dad would ask Lloyds for £100 in deposit-cheques. Lloyds give him a book of ten £10 cheques. The £100 is moved from my dad’s current account to an interest-bearing deposit account solely for the purpose of backing the cheques. The cheques would be valid for, say, two years. When my dad wants to pay the window cleaner, he writes out a cheque for £7.50 and gives it to the window cleaner. Once it has been signed by my dad, the window cleaner can use it in lieu of cash, up until the expiry date – no need to pay it into a bank account, which is the time-consuming and expensive part.
I thought this scheme might go down especially well with the Treasury Select Committee and the Old Person’s Czar, Joan Bakewell, because it was invented in the 1873 by a Mr. James Hertz, who set up a “Check Bank” on these principles in London, saying that he intended it to become the medium for the “accomplishment of an immense mass of small payments”. They had quite a good “ignition strategy” too, because they were targetting business, for whom the payment of wages in cash was an onerous and expensive task. According to the Handbook of London Bankers for 1876, there were 984 banks who honoured the Check Bank’s cheques, so they clearly had something going for them, although I have not as yet discovered what happened to the enterprise. All in all, though, I think it fits the bill for 21st-century Britain.
Having said that, though, perhaps this brilliant and innovative paper-based alternative to our current cheque system needs more support.
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Age UK is calling on the Government to designate access to cash as a Universal Services Obligation for financial instiutions, much like the supply of electricity and drinking water to consumer homes.
From Access to cash should be a Universal Service Obligation says Age UK.
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This is the wrong approach. If there is going to be a universal service obligation (which there isn’t for, for example, broadband) then it should be for the service (person to person, offline transfer of pre-paid value) rather than for the mechanism (notes and coins)
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Wealth management loans at JPMorgan, Bank of America, Citi and Morgan Stanley have grown 50 per cent in the past four years, compared with only 9 per cent for their overall loan book.
From Wall Street doubles down on lending ‘cheap money’ to the rich | Financial Times:
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Faster Payments
In the 12 months to the end of June 2021 we see that:
Single Immediate Payment volumes have increased by 26%
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Kaljulaid spoke about the concept of “trusted connectivity”—making sure critical digital and physical infrastructure linking those robots and underpinning national economies is built by democratic allies and partners in close collaboration with the private sector—alongside Anne Neuberger, deputy national security advisor for cyber and emerging technology in the Biden administration.
From Estonian president: Our connected world needs a trusted architecture – Atlantic Council:
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Snippings