I think we're at a defining moment
in the financial system.
A lot of people have said
the revolution has occurred.
I'm not so sure that's it's occurred yet,
but it has the potential to be there.
(soft chiming music)
Today, banks are are really at the heart
of the financial system.
Without banks, it would be very
difficult to make payments,
be very difficult to create credit.
It'd be very difficult to create money.
Recently, we've seen a lot
of technological disruptors
enter financial services.
So, examples would include,
not only digital currencies
like Bitcoin, but also
peer-to-peer lenders,
crowd source funding, and a whole variety
of other innovations that
people are coming up with
as ways to not use
deposits to fund lending.
So, Bitcoin is this unusual creature
because we're not exactly
sure who created it
or exactly when it was created.
It's really a series of
protocols about how one person
or entity can make a
transaction with another.
Banks are classic intermediaries.
They're there between two
people who are making payments.
What Bitcoin allows is
for that intermediary
to no longer have to be there.
If the central bank in your
country is behaving badly,
then you wanna try to
find some alternative.
So, in Argentina, when the
central bank is creating
a lot of inflation and
make it very difficult
to make payments and putting
on all sorts of controls,
Bitcoin is a terrific alternative.
In most other countries,
the central banks aren't
behaving that badly.
And so, it doesn't provide that
important of an alternative,
but it does put a
discipline on central banks.
If they behave badly,
there's this easy alternative
for people to turn to.
It so far hasn't really taken
off as a unit of account,
medium of exchange, store of value,
the classic things we
associate with money,
but it has the potential to do so.
One of the potential revolutionary aspects
of all this innovation is
that banks shouldn't think
of themselves as financial institutions,
but really data analytics companies.
And so, anyone who might have the data
to be able to do credit analysis
and who might also have
access to financing,
like a Google or Amazon,
who can issue debt
in the public markets,
could now provide credit
and could now do credit scoring
and figure out who
should be getting credit
and who shouldn't on a profitable basis.
And so, it's quite possible
that some very large tech firm
could use information
about the kinds of things
that you purchase, the kinds of things
that you do searches for,
even your location, to draw
out a lot more information
to a lender to say, hey,
this person is a good credit.
The questions is one, how much value
is in that additional information?
And two, how much are we willing
to give up on our privacy
to say, okay, I'm gonna
give you that information,
so, I can try to get a
better, effective credit score
and so, more access to credit.
And so, I think this is a
real call to arms for banks
to rethink the way they operate.
That they really should
be data analytics firms
who happen to be providing finance,
because it's going to be that
firms that have a lot of data
about people are gonna
be entering finance,
and banks better be prepared for that.
Otherwise, banks may not
be around for very long.
(soft chiming music)
