Behind the times

For some strange reason the banking industry is behind the times in the utilization of modern technology. More than almost any industry, technology has revolutionized this sector.

Modern banking is really just a matter of entering data on a computer.

Stock market transactions take place in a fraction of a second because high frequency trading can be processed almost immediately.  Stock transactions formerly took two days for completion but now that can be done promptly, this despite the fact that trillions of trades are taking place every day.

Banking data is currently capable of being transmitted instantly around the world and virtually without cost.  There remain doubts however, as to the ability of the system to handle the volume, which will increase exponentially in the next few years. If technological hurdles can be overcome, they can be effectively handled like the stock transactions.

In spite of technological problems, some things still take too long.  Tax evaders are able to avoid detection for long periods of time, but that should not be the case given modern technology. Nevertheless, it seems regulators are still less efficient when trying to catch up with money launderers.

Monetary policy that entailed very low interest rates means that investors search for esoteric means to invest money. What would happen if negative interest rates became more wide spread? Depositors’ accounts would be placed in currencies outside the reach of tax authorities. A central registry system would have to be established whereby investors could change currencies quickly and open to tax authorities, which would help to expose activities that are unusual.

Owners nowadays must pay for title insurance, a costly item, but with technology that should not be necessary. It must be recognized that things are rapidly changing and improvements will reduce problems that routinely occur, such as quick adjustments to changes in government.

There is hope that technology will be able to overcome disruptive innovators. As experts in high technology have predicted, changes are taking place at unprecedented speed, and the banking industry will have increasing difficulties keeping abreast of world trends, particularly as governments are overturned and consequently, new policies evolve. 

All kinds of disruptors are going to arise and the banking industry will have to cope with all that.


Bruce Whitestone