'The financial industry's mindset needs to change': The FT, Skrill and SapientNitro debate crypto-currencies
What is the value of crypto-currencies, like Bitcoin, in today’s financial world? It all comes down to trust, according to a panel who came together to discuss the latest episode in The Drum's Day Before Tomorrow series, which centres on how the financial industry is being disrupted by new technologies.
Joining the series creator, Dave Birss, on the panel was Financial Times journalist Jonathan Moules, Skrill chief executive David Sear and SapientNitro's chief strategy officer Neil Dawson.
Sear kicked off the discussion by stating that today’s currency system is built on faith.
“What is money? It’s an act of faith. You’re deciding that it is reliable and has value. It takes creativity to think a piece of paper has intrinsic value,” he said.
Sear pointed to the “apocalyptic” financial crisis of 2008 that has affected people’s trust in the traditional providers of financial services, arguing that crypto-currencies could take away some of the risk we currently see in the system.
“With Bitcoin, you can code conditionality into money,” he said.
He offered an example of selling a house. Rather than waiting days, or weeks, for lawyers to transfer money once a sale has been completed, the buyer could pre-code Bitcoin to change ownership to the seller as soon as soon as documents have been signed.
“That kind of application has the power to transform many aspects of the financial industry,” he said.
However, the FT’s Moules said that a lack of trust is the major stumbling block for the likes of Bitcoin.
“It goes back to the economics of trust. People at the end of it need to know someone is going to be there if things go pear-shaped,” he said, and the government has no incentive to back such propositions.
However, that doesn’t mean there is no innovation in the financial sector. Moules said crowdsourcing – a method of raising capital which avoids bank managers – has “taken off in the UK because we have an enlightened regulator who supports it.”
He later added that transformative innovation will not come from the large companies.
“They buy innovation at the right price,” he said, which is where the opportunity lies for start-ups.
SapientNitro’s Dawson agreed, suggesting that banks are at “an existential crossroads” when it comes to innovation.
“They either have to resign themselves to the fact that they are legacy businesses with terrible IT and customer service or they can try to rebuild trust and customer experience through data. Technology is just the enabler – the mindset needs to change first.”
Sear applauded the efforts of Barclays, with its innovations including Pingit, but said the bank will always face challenges when it comes to truly innovating the system because of the fundamental principles on which banking is built.
The Day Before Tomorrow series, produced in association with SapientNitro, is available on The Drum's YouTube channel.
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