It is mind boggling to realize that retail banking is still a local offline activity, specially when you realize banking is a virtual service.
For anyone that grew in a any country in the world (but the US), it is easy to see that a lot of products we consume are global, the shoes you wear (Nike, Addidas), the candies you eat (Twix, Mars), where you surf (google), how you talk to your friends (facebook), that’s not new, that’s Globalization . What is new is the rapid rate of adoption of new products (see Instagram and Draw Something) .
How come when most people invest it still a local activity, how come people still buy local stocks through their local broker, in the local bank account in their local currency, it doesn’t only not make sense, its actually dangerous since most people by that definition are not diversifying their investments.
Banks provides the world with
liquidity – the ability to exchange ownership claims with minimal cost. When we lend money to non-financial corporations, we are conscious of lending. But when depositors lend money to banks, they believe that they have “money in the bank”. Banks debts are defined as society’s money – the most liquid asset most members of society can hold. To make payments using bank deposits, customers must access the payments system through banks. (
overview-of-worlds-largest-banks ) .
So banks merely provide a “secure” and “trusted” database to hold your money (that’s 90% of what they do), So why doesn’t create a simple secure and trusted database to hold your funds ? Oh… that’s because “customers must access the payments system through banks.”, and payments are insanely expensive :
To transfer small amount of money you usually pay 2% or more , that means its at least 10 cents per transaction and usually much more. For what ? for 2 database transaction, reduce X account by Z amount, increase Y account by Z amount.
If a technology company would be brave enough to build a bank, they couldn’t charge 10 cents per transaction, that’s like having google charging you 10 cents for a search. which means payments free and transaction free banking (just show us ads of the best money managers and financial services in the world.
If Google would open Google bank, I would deposit there my money, would you ?
(comment if you would, and read
bank 2.0 by @BretKing if you are interested to see where baking is headed)