In The Ballad of Buster Scruggs, a charming Netflix anthology by the Coen brothers, one story (titled ‘Near Algodones’) begins in a bank. Now, by our modern sensibilities, ‘bank’ might be a somewhat generous descriptor. The building looks like something the big bad wolf could blow away, even with his mouth stuffed with ham. Inside, the receptionist is the teller is the manager (and later on in the story, a pan-armoured nemesis to a wannabe robber). The books are kept using, well, books. The whole thing feels like an amusing and quaint curio, from the American Frontier of the 1800s.
Times have changed, though. For all their stricture and love for convention, banks have gotten incredibly good at embracing new technology, at driving it in uncharted directions. Some of the financial institutions in the world are less banks than they are technology companies. Take Goldman Sachs, for instance. Where Facebook has about 9,200 workers on its payroll including tech and non-tech staff, has an exclusive tech team of 9,000. This eclipses the entire payrolls of Twitter (3,638) and LinkedIn (6,897). This large scale scooping up of tech talent into the financial sector is just one indicator.
Banks are on the forefront of applying new tech, often successfully monetizing futurist concepts like AI, ML and . is an active open source platform to build private blockchains. successfully deployed tech for near-instant settlement in international transactions. And AIG, with IBM and Standard Chartered, delivered the world’s first -based.
There is, however, a curious pattern to tech by banks. Well, not so much a pattern as a quirk of character. Let’s see if we can understand this a little better.
Take a look at this infographic from a, on the future of financial infrastructure. Up until the 70s, banking had consistently been on the forefront of embracing new technology. One could argue that until that point, relevant technological advancement moved at pretty much the same pace as the banks’ appetite for change. Technology then changed gears and left banking (much of it) behind.
Now think about that Algodones bank for a second. Go east about 9,000 miles and you might find yourself at a similar establishment in a municipality in a South Indian hinterland. Here too, the building looks like something a thenral breeze could blow away. And inside, the receptionist is very much the teller is the manager. And the books are still kept using, well, books. The only difference is that not only did you travel 9,000 miles; you also travelled forward 200 years, to today.
Since we’ve gotten so good at time travel and non-linear narratives, let’s take another quantum jump, into the realm of philosophy. A bank, at the end of the day, or pretty much any time you choose to think about it, is an inter-subjective reality. An institution imagined and defined collectively by a large group of people millennia ago, and one in which we continue to believe in collectively, today. Much like money itself, which is a shared myth. There is no inherent value in the paper or ink, or the metal some currency is embossed on. It is our shared belief that they represent value. And, as a shared myth, the basic structure and nature of banks have remained largely unchanged for centuries.
What then makes banks change, and what makes them stay as they are? It is easy to surmise that banks, as representatives of the world’s wealth, will always spearhead (and fund) the next step in technology. It is just as easy to conclude that they won’t change because they are straightjacketed, risk-averse institutions. If either conclusion was absolute, one would find it hard to explain the tech-saturated Goldman Sachs, or the cooperative bank in India’s Theni.
There must then be something else that prompts change. Something fundamental and simple.
“Every object persists in its state of rest or uniform motion in a straight line unless it is compelled to change that state by forces impressed on it.” — Isaac Newton, in the Principia Mathematica Philosophiae Naturalis
A bank will change only when there are significant forces acting on it. These forces cannot be purely technological. They must somehow have disturbed the socio-economic fabric to such an extent that the bank responds by changing itself. And this change could be anything. A cosmetic upgrade of the channels that experience it through. A core technological transformation. An assimilation of the force that acts on it, or even a concerted effort to eliminate it.
In an , we spoke about the ‘why’ of this series and our attitude while we dig into the belly of banking. In the next blog, we introduce a couple of free radicals that have, over the last decade, dared disturb the banks’ equilibrium. Fascinatingly for us, the banking system has responded to these phenomena in unexpected ways.
Published at Fri, 03 May 2019 12:09:36 +0000
