Consumers have never had so many options when it comes to personal finance. Think back only five years ago and not even Monzo was on the scene. Instead, when it came to where to store your money or where to get credit, you had the choice of either a big bank or...well... another big bank.
Like many of us, I often need a coffee to start my day. You head out onto the high street to get that caffeine hit and you have a massive choice. Independents offering an exciting blends and roasts. The big chains like Starbucks and Costa. Some offer amazing cakes. Some offer a place to sit and socialise. Others are just holes in the wall where you can grab a coffee to go. Whatever you want from your coffee house, there are options. On a Monday you might need a quick takeaway before a meeting, on Sunday you can relax and maybe have some lunch so you go somewhere else. Different purpose, different place.
The same principle applies when it comes to the current banking world. People go to different providers depending on what they need.
On the surface of it, this sounds all well and good. Consumer choice is surely always a positive thing, and a healthy dose of competition prevents monopolies from forming. However, unfortunately our financial lives are much more complex than our morning coffee choices, and the problem is that the systems in place in our financial landscape currently simply don’t allow consumers to fully maximise the options available to them.
You might have a savings account with one financial institution for its excellent interest rate, and then a challenger card provider (a Starling or a Monzo) for its online banking offering. And what about your credit card? That’s with a third competitor because they had a better deal. Before you know it you have a personal finance patchwork quilt, necessitating a huge amount of frustrating and time consuming administration should you wish to transfer funds between accounts (and don’t even get me started on the hassle if one of those accounts happens to be abroad!).
The reason for this is that each financial institution is walling itself off in the name of competition, meaning that there is no fluidity or flexibility between banks that would actually help the consumer. Instead of building walls, the financial world needs to be building bridges, offering its own expertise to entice customers, but being willing to work with competitors so that customers can seamlessly access another institution’s expertise in another area. And at the very centre of this brave new world being built sits blockchain technology.
I’ve talked about the role of blockchain in a world of ‘inhuman economics’ in previous blogs and how its decentralised, open and apolitical nature means it is the critical financial piece that is missing from current systems. It doesn’t care about profits or have a need to protect itself behind walls. As humans with profit-seeking motives we naturally create silos where to gain access, you need to go through a gatekeeper. But with blockchain we can form digital bridges. Digital bridges that traverse across needless emotions, conflicting motives and unnecessary frictions. By taking away the human element, and the complexities that come with human interference, it will make our choices easier.
Bringing blockchain bridges into the personal finance world would mean a platform to assist consumers to operate their financial lives more seamlessly. Imagine a world where you could move your savings or debts around, depending on which provider is offering the best rates that day. A world where anyone can access any investment opportunities, with no restrictions. A world where you can have multiple pots of capital, scattered and easily access them in one, centralised way. No paperwork, no waiting periods, no payments to yourself. No more limitations.
And all done with a swipe of your phone while having that morning coffee, be it from Starbucks or that new craft coffee house you’ve been meaning to try. Who knows, maybe it accepts bitcoin – but that’s a discussion for another day.