Is Free Banking Possible?
I work for a financial technology startup. Our mission is Free Banking for the World. When I tell people that, they think I’m crazy…
I always respond with the following questions: how much does Google charge to search the internet or send an email? How much do Facebook and Twitter charge to use their social media platforms? Nothing, right? Providing really useful core services for free is common to some of the world’s leading technology companies. Could the same be done for banking?
Let’s back up. How expensive is banking? One core service that banks provide is moving money around electronically; for example, when you purchase something with a card or transfer money to a friend. Trillions of dollars circulate the globe in such electronic transactions each year.
But be clear, all that’s really circulating here is information: if I make a $100 payment to you, the system subtracts 100 from my database entry and adds 100 to yours (that remains true even if you’re on the other side of the world). But these transactions still attract heavy fees: VISA charges up to 3% on credit card transactions; Bank of America charges $45 for an international wire transfer. If all that’s moving is information, why does it cost more to send money than it does to send an email or a text message? Why does it cost anything at all?
The answer is that banks suck:
(1) They rely on outdated technology: they still use ATMs (invented 1969), physical credit/debit cards (invented 1966) and paper (invented 100BC in China).
(2) Their business model is out of date: they still have brick-and-mortar branches, and tens or sometimes hundreds of thousands of employees (Wells Fargo has 6000 branches and 280,000 employees).
Technology has advanced at an accelerated rate in recent decades. Many industries of been completely revolutionised (think of telecommunications in the 80s). The banking industry has changed hardly at all.
But what if we employ the latest technology (mobile, artificial intelligence, cloud computing)? What if we employ a business model that doesn’t involve expensive high-street branches, corporate offices, and many many salaried employees?
Is Free Banking so unrealistic then?
Our organisation has a Massive Transformation Purpose. It is to make core banking services free, for everyone, forever. This includes the billions of people in the developing world that still have little or no access to mainstream financial services. Our purpose motivates everyone in our organisation; we hope it will capture the hearts and minds of everyone outside it too. We want to change banking for the good of everyone.