...yet it will never be this slow again.”

What emotion does Justin Trudeau’s famous line to the 2018 World Economic Forum in Davos evoke in you?  Exhilaration? Fear? Scepticism?  

Each major tech innovation has been a game changer to a greater or lesser extent, but to date the underlying fundamentals in our financial services industry have remained remarkably constant.  It was in 2016 that Oliver Wyman asked the question whether, at the end of all this, banking would essentially be any different than it was in the time of the Medicis?

Right now, it feels like it might.

When we first saw the EU consultation on Open Banking as part of PSD2, a number of people we spoke to saw it as yet another regulatory burden with many technical flaws around control and privacy of data.  Controversies around tech companies screen scraping data caused quite a stir.  How many were then focused on the logical, perhaps inevitable, progression from Open Banking to Open Finance?  And yet here we are.

There are two aspects of the current debate that I’d like to explore further.  Firstly, the extent to which governments and regulators are prepared to let markets, and especially big tech, lead the way in creating the new world of Open Finance.  Secondly, some implications for the central bank dogma about the singularity of money.

Take Open Finance with Artificial Intelligence, and you can paint a plausible picture of a very different banking system.  Perhaps the biggest single question for “the authorities” is how they want to deal with the balance and concentration of power between the major market players and the society they are, at least theoretically, there to serve.  If the benefits of Open Finance were to become concentrated in a small number of large banks and / or tech businesses, what does that do for competition, consumer choice and financial stability?  It seems to me that it is important early on, like now, to set the requirement for Open Finance to be just that – open source, open access, a level playing field.  Not the proprietorial property of individual firms.

A Pound is a Pound is a Digital Pound.  Or is it?  Recent discussions about central bank digital currencies and tokenisation of money have included a debate on whether the singularity of money concept can survive.  Ten pound coins equals a ten pound note equals ten pounds in your savings account.  But if the ten pounds in your account, or virtual wallet, can be programmed with additional features, does it start to gain additional value compared with other forms of the currency? Maybe it does, for example in the way we pay for goods and services – think the 21st century version of cash on delivery as one Bank of England official said to me recently.

Exhilaration? Fear? Scepticism? Perhaps none of these. But if we are to navigate the next phase successfully, it does seem to me that government, regulators and individual banks, building societies and credit unions need to be thinking very deliberately about the future they want to try to create over the next ten to fifteen years; beyond the typical three to five year business planning cycle.  If the revolution is coming, better to be part of it than be consumed by it!

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