Looking at what might happen in the near future – five to ten years hence – the panellists speculated about the fortunes of central banks, the big techs and financial inclusion.
The panellists represented a fairly broad sweep of the globe – North America, Europe and Asia Pacific. Scarlett Sieber, managing director, chief strategy and innovation officer at US-based consultancy CCG Catalyst, said the on-going consolidation of the banking industry in the US would have a significant effect on the future of money.
During the past ten years, she said, the number of banks in the US had reduced by 34%, “we are losing almost one bank per day”. This was exerting a big influence on the bank system in general and on the economy and small and medium enterprises (SMEs) in particular. “Many of the smaller banks were best at servicing these SMEs.”
The concept of identity and the well-worn phrase “the democratisation of data” were also big issues in the US. “Everyone is finding new ways of getting information and servicing customers better, and customers can get better control of their own data,” she said.
Asked by panel moderator James Lloyd of EY whether the US would lead the way in this democratisation, Sieber was non-committal, observing that there were “opportunities”. Other areas in the world, she said, were more advanced than the US. “At the moment, we are looking at other problems, such as the use of cash. In the western US, 26% of transactions are in cash, many of them done by people under the age of 25; 34% of their transactions are in cash. The US is very different from the rest of the world. I don’t see that changing in the next five years.”
In Asia Pacific, the situation is more advanced, if the advances are a little unevenly distributed. Michael Moon, managing director, payments, trade and communications Asia Pacific at Swift, quizzed several clients before Sibos about their views on the future of money. One, from India, viewed it through the prism of currency, stating that the future was the renminbi and rupee. Relating an anecdote about being repaid for London theatre tickets by a number of colleagues from different countries, he said an Indian colleague gave him cash in sterling (which he wasn’t sure what to do with), another directly transferred the money via a mobile application and an Australian colleague “hasn’t paid me yet”, to the amusement of the audience.
The anecdote, said Moon, demonstrated the problems inherent in the payments environment, such as the multiplicity of options. “We are focused on making the payments experience in our domestic lives as easy as possible. We also need to bring that retail experience into the cross-border payments experience.”
Leda Glyptis, chief of staff and CEO of 11FS Foundry, pointed out that in the recent past, the new ways to pay have not been dictated by banks, but rather by the more sizeable new entrants in the payments space and financial regulators. The latter have permitted “certain types of business models to flourish”, which favour many of the fintechs entering the scene.
Different approaches in the US, Europe and Asia Pacific have generated different business models and players. “If what we do is move assets and goods across borders in real time, the big problem we have is to fit the new world into vessels that are not fit for purpose,” said Glyptis.
Lloyd pondered whether the view of money is being determined by private actors, such as Facebook (with its proposed Libra currency) and Alipay, that can leverage their scale and the network effect. Regulators scramble to respond to these entities’ initiatives.
Tony Fish, founder of UK-based AMF Ventures and a specialist in data and ethics, said the next two to three years were “sorted” as far as money was concerned; the focus is on speed. However, the next five to seven years are not as certain. This was because of a number of elements, including characteristics data has that money hasn’t. For example, money is not accountable or traceable, but “that will come”, he added. Also, money has “lost its humanity” but data would bring that back. Once more data about people is available, money becomes programmable, he argued.
He spoke about Facebook’s plans for its cryptocurrency, Libra. Banks are mandated by regulators to identify where money in accounts is sourced from and can “look into the envelope of an account”. Who will be regulated to look inside the envelope, he said, would be an interesting question.
Glyptis said there is a prevailing assumption that the world will “move away from money as a bearable asset. Many people will fight against that, but the final call will be government-driven.”