Growing up in the 80s and learning about saving, investing, and banking in the 90s taught me the ropes and formed the base knowledge for what I do in my day job. Learning what a savings account was, how to endorse and write checks, and basic investing through bank offered products was actually part of the standard curriculum at Cupertino High School. I used the knowledge gained in class for about three years before it was mostly obsolete, especially on the retail banking side. I cannot even remember the last time I wrote a paper check… hell I can’t remember the last time I ordered checks. E*Trade completely changed the way I invested and it took me completely away from traditional bank offered products like savings accounts and certificates of deposit into corporate fixed income, exchange traded funds, and stocks and options.
The world of retail banking has changed dramatically in the last ten years, especially in the way we think about, transfer, and utilize money. The way we even think about money is different. For example, when my parents’ generation thinks about money they think about paper currency, paper checks, and depositing and withdrawing something physical that symbolizes wealth. When I think of money I think of a number displayed on my computer or smartphone screen. I think about how purchases or earnings will increase or decrease that number, and when I invest I think very much about risk and reward based on various mathematical factors that will impact that number. In a single generation money has moved from a physical asset to a virtual notion. For example, you can pay for a taxi in NYC by touching your debit card, credit card, or phone to a reader on the glass partition, you can transfer money to anyone in the world with a bank account in under two hours from the Internet, and the market continues to demand and provide ever more efficient technologies.
Google Wallet allows you to essentially use your Android phone as a debit card in the U.S. Citibank’s PopMoney service now allows you to transfer money to another US account holder using an email address or mobile number, and Barclays has just launched a service called PingIt that lets anyone with a UK mobile number transfer or recieve money into a UK account. Imagine the future of instant, mobile, bank institution agnostic payments. You could be out at a bar, pick up a round of drinks, and by the time you bring them back to the table everyone has already “pinged” the money directly to your account. In travels through Kenya and South Africa I discovered that it is common to bank from your phone and in many cases you can bank completely from your mobile sans debit card, or even traditional bank account. First Rand bank in South Africa will text you a code to enter into a cash machine in order to withdrawal, no debit card needed.
Where do you think the future of money is headed? Sweden is actually the first country in line expected to have a fully cashless economy. Physical currency is on it’s way out; it is fragile, relatively expensive to produce, highly susceptible to theft, and a pain to carry around and manage. Virtual currency is susceptible to hacking, and is fully dependent on an electronic infrastructure. Those are but a few of the pros and cons of each type of currency. Personally, I never write checks, I rarely carry cash, and I transfer money fully electronically. In the developed world operating in-line with technological innovation is the most efficient and cheapest way to do business. In the developing world cash is still king, but that is quickly changing.
million billion dollar idea… providing a telecom carrier and banking agnostic service and supporting infrastructure to send and receive payments requiring nothing more than a phone with text messaging capability. Similar in premise to the services mentioned above, but completely suited to the “bottom billion” in terms of market readiness. Anyone ready to write me a check… I mean text me some funding?