The research report, titled Horizon Scan: ICT and the Future of Financial Services, conducted by Ericsson and Imperial College London, explores the implications and impact cryptocurrencies are having on the financial services industry.
One of the biggest driving forces in the disruption is the matter of trust.
When I was a financial advisor, one of the most oft-repeated instructions was to become a ‘trusted advisor’ to clients. Trust in the financial services industry is a means to attract and retain clients and assets under management. If a company can employ marketing tactics or other means to gain trust, that firm will likely receive more assets from investors.
The financial services industry suffers from a level of distrust spawned by crashes, corporate scandals and high profile corporate theft. Throw into the fray that some corporate bonuses in the financial services sector exceed dividend payments to shareholders, there’s not much trust.
Bitcoin completely eliminates the need for trust by accomplishing its work with computation. We no longer need to figure out if we trust a person (a financial planner, banker, etc.) or a corporation; hence causing Bitcoin believers to declare, “in cryptography we trust.”
Ironically, at the very same financial services company I worked for, there was another saying: “Men lie. Women lie. Children lie. Numbers don’t lie.”
This very truth may be the undoing of the financial services industry as we know it.
The report also explores the role of humans in the future of financial services. The Internet of Things enables a machine to have an identity, based on an IP address. The machine can then have an economic identity and create a DAC (distributed autonomous company). The report states:
“In short, a DAC operates as a corporation, but without the people.”
Machines, connected together in a network, could potentially “engage in economic activity without guidance or direction from humans.”
It goes without saying that if companies can create themselves, the current regulatory climate would be challenged, to put it mildly.
Government is essentially a social system. Technology is pushing the envelope to ask, and answer, critical questions pertaining to social order, governance and taxation.
Ecosystems will arise and evolve, possibly creating new means of governance, all handled by technology. Rather than being subject to a geographic government, what if the world’s citizens chose their means and mode of governance according to ideology?
There is a strand of this notion already taking place in the crypto world. For example, what if dogecoin enthusiasts the world over created a decentralized DogeNation, complete with a code of governance along with the cryptocurrency? It’s possible that a non-local ecosystem can potentially become its own nation.
The report quotes Thomas Paine:
“We have it in our power to begin the world over again.”
Bitcoin and the underlying blockchain allow you to be your own bank.
The report draws the conclusion that:
“[cryptocurrencies] offer consumers the ability to take the financial services industry into their own hands and build innovative services that can compete with the largest banks and financial services companies.”
The handwriting on the wall is clear: technology is forcing change in the unchallenged and archaic financial services sector.
Images from Ericsson and Shutterstock.
Last modified: June 10, 2020 4:07 PM UTC