FinTech and the end of the money
This Fintech Revolution May End Money, But The Next Fintech Revolution May End Money.
Renowned FinTech Investor Matt Harris, Partner of Bain Capital Ventures
In an always online world, what’s the point of paying fees to sell assets, buy currencies, and then transfer currencies to someone who will sell them to buy other assets? In an era before networks, when strangers came to do business, they preferred to trust hard cash rather than each other. Today, they prefer to trust plastic card authorization systems. In the future, neither will be necessary. If you can be sure about the ownership and price of the assets, you can just use the assets.
You sell me an NFT, I’ll pay you half Bitcoin and half IBM
Â© HÃ©lÃ¨ne Holmes (2021). NFT available here.
A world in which assets are constantly on the move sounds crazy – but I think Matt is right. And to be honest, this vision of the future of financial transactions, where money is a middleman that disappears because assets can be traded like money-like instruments, is what first interested me. times in the future of money many years ago. Here’s whyâ¦
The IBM dollar
The Center for Financial Innovation Studies (CSFI) is a London-based think tank that has been exploring the future of the financial services industry for many years (and I am very proud to be a member of their board). They have always led the debate on the impact of new technologies across the industry and brought together informed opinions to discuss key issues.
In 1994, I retrieved a report from the CSFI written by Dr Edward de Bono, known to many as the inventor of “lateral thinking”. Dr de Bono (passed away this year aged 88) had thought about the future of money (in an era before Internet and Web 3.0 or whatever) and his brochure had an immediate impact on me, coming as I did from the technological side of electronic money.
It was called “The IBM dollar“and at the heart of de Bono’s vision was that IBM could issue” IBM Dollars “which would be redeemable for IBM products and services, but would also be redeemable for money from other companies or for other assets on a liquid market.
The difference between IBM stocks and IBM money, to continue this example, is that IBM stocks are a claim on something that is traded through intermediaries. But IBM’s money is, well … money. Or at least like money. It is a bearer instrument, not a claim on anything else. At the time, this was highly speculative thinking, but the emergence of early electronic money technologies (such as Mondex and Digicash) meant that the idea of ââtamper-proof interchangeable electronic bearer instruments that could not not being duplicated (i.e. what we now call fungible tokens) was no longer science fiction.
When I first read de Bono’s ideas on tens of millions of circulating tokens, constantly traded in futures, options and forex, I was shocked: shocked because I immediately realized he was right. Remember, he imagined this before the internet, but thought deeply about what the future of high-speed electronic networks and high-powered cryptography would mean for financial services. He came to the conclusion that if you could trade baskets of these liquid assets directly between counterparties, you wouldn’t need to trade them for cash first: you could stay invested in the assets.
Yet this seemingly strange world of constantly moving money-like assets can at first glance seem unbearably complex for people to manage. But this is not the world we will live in. It is not a world of transactions between people but, as I wrote in my book “Before Babylon, beyond Bitcoin“, transactions between what Jaron Lanier called” economic avatars “and what I lazily call bots. It is a world of transactions between my virtual self and your virtual self, the virtual supermarket and the virtual government. C is my machine learning AI. supercomputer robo-advisor, or more likely my mobile phone front-end, communicating with your machine learning supercomputer robo-advisor to determine which basket of tokens he wants from you in return from one of my books, or from a day of my time at a workshop or a speech at your conference.
Enabling the future
These robo-advisers will be quite capable of negotiating with each other to close the deal. Dr de Bono predicted this in his brochure, writing that “pre-agreed algorithms would determine which financial assets were sold by the buyer of the good or service based on the value of the transaction … the same system could do match the demands and offers of financial services. assets, determining prices and effecting settlements. âHe also wrote that the key to such a system would beâ the ability of computers to communicate in real time to allow instant verification of the creditworthiness of counterparties. â
That last point is pretty important, and that’s why I want to point out Matt’s bold prediction. Mast keep writing that “once the identity is resolved, the credit risk becomes easier”. This is due to the nature of reputation in an online world. Reputation, such as credit history, which is immutable and accessible to any counterparty becomes the fundamental transaction catalyst with the potential to displace the incentive functions of commercial banking.
Or, to put it more simply, once you know who everyone is, payments are easy. This is why the future that Edward and Matt accurately predict relies on acting on digital identity and why, when it comes to imagining the financial transactions of future generations, identity is the new money