The structure of the banking sector is riddled with expensive,
slow, error-prone and monopolistic processes and is ripe for major
technology-driven change.
That was the central message in the CityIT conference keynote
speech by Tim Jones, former chief executive of NatWest
Retail.
The collapse of transaction costs and the decreasing importance of
geography will force technology innovations, he said.
"The dotcom bust is a distraction, and we are about to see a
five-year period of zooming off," Jones added.
"The economies are powerful - be ready," he warned.
Jones, who helped to introduce the Switch system in the 1980s and
who developed Mondex digital cash in the 1990s, is now chief
executive of Purseus, a new multi-currency interbank clearing
system aimed at the retail and commercial markets.
Jones said a combination of digital phone technology and digital
money will bring about a banking revolution, when processing power
and bandwidth are able to give consumers the speed they need.
"It takes 100 milliseconds to turn a paper page," he explained. "If
anything electronic takes longer than that, it's bust."
Parts of the banking infrastructure are dynamic, Jones said, giving
the example of the global reach of automatic teller machines and
point of sale technology.
There are also many channels to banking, customers can get a loan
in five minutes, and it is now possible to get instant insurance
cover, he added.
But Jones also derided core banking infrastructure as "pants".
"Interbank settlement is a mess and ridiculously slow. Money should
flow in seconds not days," he said. "There is absolutely no excuse
for transfers to take anything more than three seconds.
"The fundamentals of banking are being ignored," Jones added. "Too
much of the structure of banking is monopolistic, which makes it
prone to abuse.
"Competition is good," he said. "It drives innovation."
Why Mondex failed to take off
Mondex, the electronic
purse, failed because it was the wrong path to market, said Tim
Jones, former chief executive of NatWest Retail, who was
responsible for its introduction in the UK nearly 10 years
ago.
Giving a keynote speech at CityIT, Jones said a fundamental mistake
had been to attempt to fulfill the demand for ubiquity of service
by focusing on one town, Swindon. In the event it was a promise
that could not be fulfilled, he said.
"If I had my time again I would concentrate on broad vending
applications. For example, enabling consumers to buy chocolate from
Cadburys machines on the Underground, or for parking in NCP car
parks," he said. "Vending is the most challenging area for digital
cash cards."