I was having a recent conversation with Pat Allan about the future of money, and how someone might approach the task of buildig a bank with the benefit of what we know about how money works today. We discussed Matt Mullenwag’s past idea about creating Safe Bank. Eddie Harran ran a Trampoline session on it. Ross Hill also recently commented via his Letter.ly about the future of money, which I responded to with these thoughts.
From a user point of view, what banks provide us is actually just a scoreboard. When you break the features a bank provides down into user stories it looks something like this.
Nb: These user stories are written in the structure; as a ‘user,’ I want ‘this,’ so I can do ‘that.’
- As a person who earns money, I need a place where I can reference how much money I have at the moment, so I can understand how much or little I have.
- As a person who has money, I need to be able to use that money at any time, so I can buy things that I need.
- As a person who has earned money, I need to provide someone with a way to pay me, so I can collect money safely in one place.
- As a person who owes someone else money, I want to be able to transfer it to them, so I can pay my debts.
- As a bank, I need to ensure the security of peoples money score, so that they trust us to continue keeping it.
Can you think of any others? Could we delete any of the above?
I think this is interesting to consider, because of the base needs we have around our use of money and how many of them have changed with the passing of time. Indeed, we are more and more often seeing people use their ‘capital’ in a variety of ways which create benefit for themselves, their peers and the planet at large. Things Iike Kiva, Kickstarter and Square are changing the way we disburse our capital – which in fact changes the different ways banks need to assist with the transferral of ‘points.’
Note that you actually don’t need a lot of the abstractions which a ‘bank’ provides on top of this. You don’t *really* need to pay interest (although banks have consistantly setteled on this method to profit from customers). You don’t need to collect interest (although that can be useful). You don’t really need physical branches, unless you don’t trust that the ‘bank’ is able to deliver on the above stories with reliability.
In the past, these layers of abstraction were rightfully required to deal with the complexities of distributing physical cash wherever people needed to send or receive it. This problem no longer exists. It’s 2010, and we have the ability to rethink many of the services we’ve taken as utilities for far too long.
How would you reinvent the idea of a bank?
The Squiggly Line 
It’s great to read about these ideas. My experience of banks has lead me to do as little as possible with them and always seek the simplest solution for fear that they’ll make my life a misery!
What I do feel is missing in your post above is a recognition that banks aren’t just there to meet your personal needs. They have a big role in the community and the world at large. They don’t just operate to fulfill the ‘stories’ you’ve outlined. With this is mind, are there further stories to add? And that is where I sign off as I don’t know enough about banks, only that they serve a greater need than what we experience personally.
Hi Steve,
I am not sure why there is no reference to the role of a bank as a lender. Was this intentional? It seems unrealistic to suggest that people could fund their mortgages using Kiva (or similar)…though I could see that there would be significant community engagement benefits if this was to occur.
Should there also be a reference to the concept of ‘security’? Although the number of failed banks since the GFC has undermined the view of banks as ‘secure’ most people would still feel that there money is more secure in a bank than under the mattress.
Lots of good points Steve! If there’s one sector that is desperately in need of disruption, it’s retail banking. Fortunately, there are a lot of smart people working on this. Have you heard about http://banksimple.com/ ? I like what they’re trying to do, and it will be interesting how the industry reacts to it’s launch.
Hi Steve – great topic! I echo @Rose Levien and @Simon Waller’s points – banks are an “institution” in addition to the *utility* they provide (although it is very hard to separate the two), similarly the role as lender (essentially the rationale for banking in the first place).
Banks provided an alternative to the usurious money lender – a regulated, market based institution where funds were largely deposited and the spoils of lending shared with the individuals providing the funds.
I suspect, too, that an element missing from some of your story structure is that of time – how much of that utility is required “on demand” or “with notice” or “on a schedule”?
There is also missing a sense of community (which admittedly can be hard to find in some of today’s banks), but is echoed in It’s A Wonderful Life (http://www.imdb.com/title/tt0038650/) and now best illustrated through Kiva etc.
Of course the compromise between the two facilitates the velocity of money that prevents stored wealth from sitting idle and lets it get on with growing economic wealth – so the utility at a community/societal/economic system perspective is actually much higher.
The value to the consumer, however, is also relevant and (I think) where your post originated. I reckon the utility value is almost commoditised, and as less physical money is used we should expect the pricing for vanilla banking services (the ones you have highlighted) to approximate zero (or at most a small fee) that reflects the cost of service provision (largely online).
If that happens, and lending remains the core business I can imagine banks allowing some involvement in the (currently opaque) loan approval process by consumers – for example I might declare that I don’t want my deposited funds used to fund companies in particular industries (fast food, tobacco or others) or countries (Social Activism trumping pure capitalism). That’s drawing a longer bow, but it doesn’t take a lot of imagination to see where things could go with technology.
Value to me also means that banks provide well considered services appropriate to my financial or life stages – they hold the data (a la Mint and from what I can see BankSimple – thanks @Gaurav Dadhania) about how, when and with whom I spend my money.
To Simon – the growing sector of peer-to-peer or social lending would actually suggest that we could get to a stage where people are able to secure large amounts of money peer-to-peer, without the role of the bank as lender or mortgage provider. It’s actually anticipated that this sector could be up to 10% of the personal loans market in 2013. Zopa, the UK’s leading p2p lending platform, had more money in circulation this year than in its three previous years combined, which shows the potential for growth.
An organisation like Zopa has definitely been able to adapt the ‘good stuff’ from the traditional banking sector, like the necessary checks and balances, but has really revolutionised the way people think about borrowing and lending.
Hi Steve
Great article. I’m very interested by the increasing separation of transactional and loan banking into a more personal format. The work IDEO did with young single mums on Keep the change http://www.bankofamerica.com/promos/jump/ktc_coinjar/index.cfm?&statecheck=DC and savings driven initiatives like Smarty Pig social banking http://www.smartypig.com/ interest me as they seem genuinely to be applying service need to service delivery.
I think there is a will for change amongst the big banks too – I’m currently with one of the big 4 banks in their Immersion centre which is using prototyping and design to trial innovative concepts http://www.banking4tomorrow.com/?p=757
I wonder if it’s more about the end of ‘user stories’ and more about creation of ‘user contexts’… Thanks again…
Thanks everyone for your awesome comments! This has helped with my thinking lots 🙂