Bank to the Future
What might the finance institutions of the future look like?
In a blog post called Tomorrow's World we had some fun imagining what kind of products and interactions will emerge out of the internet architecture of 2030.
Future gazing might seem like a fairly reliable way to make yourself look stupid. From Irving Fisher, who argued ‘stock prices have reached what looks like a permanently high plateau’ three days before the Great Depression-inducing market crash of October 1929, to the record executive who claimed ‘The Beatles have no future in show business’, history is full of bad predictions.
This is because the future is shaped by what Nassim Taleb calls ‘Black Swans’: - events that are impossible to see beforehand, retrospectively explainable, and of huge consequence. The Great Depression and the success of the Beatles were both Black Swans.
Fundamental changes may well be near impossible to predict, however we believe that there are patterns and trend lines that can be followed up a logical path to give us clues, particularly in the business context.
To imagine Tomorrow’s World we followed these simple trend lines:
- Companies will always try to create value
- To do this they will try to remove friction for customers
- To do this they will build on existing infrastructure and ideas
- This will create a fast, complicated networked economy
- Trust will be a fundamental design feature in this economy
We believe these trends are likely to continue. So much so that we have used them as pillars around which to build Intergiro. Below, we drill into each trend a little and show you how we are trying to support our customers.
1. The creation of value
Our base assumption is that all enterprises; for-profits, non-profits or any kind of charitable foundation, will always try to create some kind of value, be it in the traditional monetary sense or perhaps social or functional value.
In order to maximise this value, the financial system needs to maximise participation. The next Black Swan company could come from anywhere, so increasing participants increases the pool of potential.
We explain why we think financial inclusion is systemically important in our first blog post Start with Why.
At Intergiro we are working on innovative ways to use many data sources to independently risk assess all companies and organisations, avoiding the traditional broad brush exclusions based on location and industry. This we hope will lead to fairer participation and, we believe, more value creation for all in the long run.
2. The removal of friction
If you believe that all organisations exist to create value, then what follows is the basic idea that all value is created at points of friction. This applies to all value creation but in the case of monetary value, you make money when you sell something for €50 that cost you €20. What entitles you to do this? You have removed some friction.
Let’s test this idea by imagining a frictionless world, where nobody has any needs or wants. In this environment, the sale price would converge to a cost price of €20, because anyone can make or create whatever they need, exactly when they need it. Therefore no additional value is created in this imaginary example.
We don’t see this changing and just like the businesses of yesteryear and tomorrow, Intergiro is looking to remove some friction.
- Our onboarding process is clocked in minutes not weeks, with a current record of 28 minutes 31 seconds from the start of application form to working bank accounts. We think this is the fastest in the world for business bank accounts.
- We use innovative transaction monitoring to stop unnecessary AML questions, or give you a chance to tell us about an unusual transaction, before we have to freeze it and give you a call.
- Our smart virtual card solutions help you and your team spend on the move and control costs. A company can create, or cancel hundreds of debit cards in a moment.
- Accounting system integrations will make year end submissions and tax returns a breeze.
3. Building on the shoulders of giants
Companies are already building on the products of other companies, because it means they need to do a lot less inventing, therefore getting to market, scale and value creation a lot faster.
The classic example is Uber, who didn’t have to invent the car, the internet, the global cellular network, the smartphone, the app or operating system. They just had to make the whole stack sing.
We see no reason why companies would slow themselves down by changing this strategy and we see the trend increasing as more protocols and templates become available for others to use. In Tomorrow’s World, Dietmar’s taxis are leased from the city’s privatised transportation scheme so he can grow faster, the electricity network allows him to charge his cabs when they need it and he uses the payments system of the road network to feed into his pricing algorithm.
In order to add most value, financial institutions will realise there is no longer a need to do all the plumbing themselves. Intergiro is no exception - we connect to banks and in turn enable others to build on top of what we’ve built.
4. The networked economy
These increasingly ‘stacked’ business models will lead to a highly networked and complex economy, where global supply chains will become even more integrated and totally new value chains will be quickly created, like Dietmar’s driverless taxi trading with the roads as it transports customers in Tomorrow’s World.
This might sound a little futuristic, but it's already happening. Airlines, logistics companies and retailers like Amazon already have automated supply chains. All the talk of de-globalisation may look to impede these supply chains, but in reality we see this creating niches and angles for smaller players to flourish.
The final enabler is to overlay this network with financial systems.
At Intergiro we want to build on the top of a network of many different providers, to become an application layer for others to build on.
We'll post about this ‘layering effect’ and the rule of abstraction that it goes with it, in a later blog.
5. Trust by design
Trust is slowly built and quickly lost. We believe this is also true when building trust into systems, where trust mechanisms cannot be quickly added as an afterthought. We build trust into everything we do - something we call ‘trust by design’.
- Trust is created through familiarity and transparency. In traditional tribal societies you trusted people because you knew their friends and family. Fast forward to the internet economy and familiarity is still the driver, but the mechanism has changed. We help customers get familiar with us by writing about our ideas (blog), sharing news (Twitter) and showing our team at work (Instagram). Being familiar relies on being transparent. Families and friends don’t keep secrets from each other and nor do we. That means we communicate openly and clearly with our customers and with each other.
- Trust by design starts with how we design our organisation. We have set our company up to favour adaptiveness over control, which means everyone who works here operates with a high level of trust. Our non-hierarchical structure allows great ideas to rise more quickly and our feedback systems allow people to develop, based on mutual trust with others in the organisation. We foster a culture of transparency and openness through our communication tools and we trust our people to do the right thing as they understand and buy into our principles and our vision Start with Why.
- Building on our Org Design is our trust optimised business model. Most financial business models actually create mis-trust when you understand how they work. Insurance businesses have an information advantage over you, but don’t pay out if you try to get an information advantage over them. Fund managers have tricks to make their returns look better, even though they have much much worse returns and higher prices than simple index trackers. Most people don’t realise that banks gamble with their money without telling them, then lie about how much money is in their account (hence why a ‘run on the bank’ is a bad thing). At Intergiro we don’t lend out your deposits and we have a simple transactional pricing structure that does not discriminate by organisation size.
- Increasingly, organisations are rewriting notions of trust by using immutable ledgers to enable the movement of value, powered by cryptography. While previously a centralised organisation or figure was required to transfer value, transactions between two parties can now take place with a decentralised transaction ‘chain’ (blockchain) as the only form of ‘trust’ between parties. At scale, this model is similar to the first financial transactions between ancient societies. We believe in restoring simpler methods of value transfer through trust by design.
- Our internal control system has been designed from the floor up to create trust. Unlike in normal banks, our payment systems are entirely automated, so staff members have no access to client funds. This self-serve model forces us to create clear, easy to use customer UI, but also completely removes an internal fraud vector. Just to make sure, we also track every single click on our system, both from a staff and customer side. We apply anomaly detection machine learning to this data to flag any unusual internal behavior.
- Established brands may have the luxury of decades, even centuries, of customer trust, but we have the benefit of a zero based designed IT architecture. Our next generation IT security combines the principles of distribution, isolation, least privilege and encryption everywhere. This keeps our systems secure and safe so that our customers trust us to protect them from fraud and cyber threats.
In future blogs, we’ll outline in more detail what each of these trends means to us. For now, we’re going to make like a tree, and get outta here.