This is a quote attributed to Bill Gates, which resonates with me. Whether the quote banking is necessary banks are not, is the real quote, or it is:
Both of these quotes petrify banking executives, because they are both true.
Banks continue to claim they are embracing the use of technology, or FinTech as they would have you call it, but that does not ring true to me.
The reason I call bovine feces on this statement is my understanding of a few key factors in banks.
- Banks do not like new things, until they are proven money-making ideas. Adaptation of new ideas is not any banks strong points (unless it makes them a lot of money).
- The backbone of the #FinTech revolution is ATM machines and point-of-sale systems which are still running on Windows XP. #FinTech is not as futuristic as you might think.
- COBOL programmers are still making a fortune from Banks , because Banks are afraid to upgrade their existing core system to a language from this millennium. This odd situation which arose with Y2K, where programmers were paid ludicrous sums of money to make the following change in systems:
- 05 YEAR PIC 99
* DEFINE A YEAR ONLY NEED 2 DIGITS
- 05 YEAR PIC 9999
* NOW WILL WORK UNTIL YEAR 9999
- Yes, that was a big money-maker for a few consultants (I am simplifying). These same consultants continue to make bags of money because banks are afraid to use a new language like say C++ or Java?
- Banks have Fiefdoms and they don’t like playing with each other, thus they typically have very diverse computer systems. This I can guess on the basis of a few observations I have seen at a specific bank, which merged with a large trust company many years ago. The Trust Company still exists in parts of the banks system, which has lead to issues with systems interworking with each other.
There are countless other examples out there, but this belief that FinTech will be changing things for Joe (or Josephine) Six-Pack any time soon is a falsehood.
Automation of systems continues with Banks, but again, these are cost-saving measures, not technological leaps forward. Being able to photograph a cheque to deposit cuts down on the bank having to archive cheques, mail out cancelled cheques, etc., so it was finally adopted by the big banks.
The applications on Smart Phones are allowing banks to close more branches, and cut down on employees, again a cost-saving measure.
The Future is so Bright?
We need banking services, but, unfortunately the way the banks implement them, leave a great deal to be desired. The business of banking will see many changes over the next few years, but not quite as many as a lot of financial pundits think.
What was the Question ?
If Fintech is the answer, are we sure we know what is the question? Fintech started off being about changes to the banking and investing back ends, but not any more. Fintech is now being used to describe new On-line banking and Investing systems, as well as, automated investing systems. For arguments sake, let us view Fintech, as any new technology in the Banking and Investing world.
Fintech, Welcome to the Machine
Savings Passed On ?
With these new technology changes, the main thing will be, will savings realized by financial firms passed on? Some of the savings for financial firms are:
- Less employee overhead, which should mean significant savings. If there is less need for tellers, investment advisors, insurance advisors, etc., that will save these firms big money. Less salaries, less benefits to pay, no pensions, these savings could be the biggest Fintech improvement, but will I see savings?.
- Less Mortar & Brick locations, this is a follow on to all the on-line services. If Fintech means more services on-line, it could mean less need for as many “regional offices” and the like.
- Easier and cheaper transfers between banks and investing firms. These “costs” are hokum any how, but now even harder for the big banks to hide. All of this is comms between computers, no humans involved. Why does it cost $3 to make an Interac Transfer?
- Lower Fees for services like costs per trade and such. With on-line trading and banks this was a big promise, that has never really come to fruition (yet).
- Faster and better portfolio decisions sound like something that should happen, but that depends on how it is implemented, and faster is a relative statement (same day transactions can be faster than 2 or 3 days lead time, but are worse that within 5 minute trades).
- Consolidation of firms might happen in the U.S., but less likely in Canada. Canadians continue are at the mercy of the Big Banks, but maybe Fintech will cause small on-line banks to break through? We can only hope on that one.
Fintech For Everyone ?
Will I be able to take advantage of these great new technologies, or will this simply end up being something that benefits big investors and financial firms? I suspect there will be some advertised Fintech features offered, but my assumption is this will end up being a big money, people and time saver for the big financial firms, but not so much for John Q. Public.
Can I Create a Fintech Edge ?
Can I, as a relatively tech savvy investor, find my own Fintech edge? Not likely is my opinion. That would mean large financial firms would open up their systems to me and other programmers. This will not happen, security concerns would be the biggest issue.
All I can think of is Pink Floyd’s lyrics from Wish You Were Here,
“Welcome my son, welcome to the machine”
This is the only thing that has not been used to try to get folks interested in the alleged new FinTech world, the Premium Artisan Automated Investing Profiles .
Beautiful Artisan Investing Looms
Image courtesy of worradmu at FreeDigitalPhotos.net
What do I mean by FinTech? Well you might ask, let’s go with Wikipedia’s view:
Financial technology, also known as FinTech, is an economic industry composed of companies that use technology to make financial services more efficient. Financial technology companies are generally startups founded with the purpose of disrupting incumbent financial systems and corporations that rely less on software.
Artisan Investing™ would imply: Individual or customized (and naturally highly researched), investing plans and everyone likes to feel like they are not just one of the unwashed masses. Your investing would be taken care of in an Artisan way, using only the best techniques, methodologies and investing concepts. The ETFs used in your profile would only be of the highest quality, and only invest in companies that create the highest quality products.
However, if we view the term Artisan as meaning:
a worker in a skilled trade, especially one that involves making things by hand.
then the concept of Artisan Investing™ is completely ludicrous (of course), since FinTech implies automated or “… not made by hand”. FinTech implies using technology to do things well, since Artisan implies using “tried and true old school methodologies”.
Artisan is getting tacked onto all sorts of products and services, why not “new” financial technologies, as well? Soon to be available from your local trading housePremium Artisan Automated Investing Profiles.
For the longest of time, I refused to deposit cheques in the ATM machine (after reading horror stories about stolen cheques and the like, from nefarious false fronts which steal cheques), but after a while, I started using this technology (usually because the lines for the tellers were so long). I have written previously about not wanting to use my home WiFi (and absolutely never use public WiFi) for on-line banking, just because I am that kind of paranoid guy, but now I find myself doing most of my on-line banking using my laptop which is connected via WiFi (but not public WiFi). Am I a lover of old financial technology , only ?
Old Technology? Image courtesy of cooldesign, at FreeDigitalPhotos.net
Last night I caught myself in another one of my “still thinking like an old cranky guy” habits, and that was taking cheques with me to work, so that I could deposit them on the way home at the ATM machine at the bank. I dutifully went out of my way to stop at the bank, and deposited the cheques, but since TD has gone to a new ATM interface, it dawned on me, why wasn’t I just doing the “take a photo of the cheque” deposit method?
The TD ATM machine is simply photographing the cheque, and ‘parsing’ it (although they also keep the cheques, although I have no idea whether the darn things are archived or just shredded after a few days), the same methodology as if I was using my phone. Why didn’t I simply use my phone? My only explanation I can give is old habits die hard, and I keep forgetting about some features available from my bank.
I do still feel some paranoia, so I tend to photograph my cheques with WiFi turned off, and using my Cell Phone Providers network (which is marginally more secure), but I have to remember that the feature exists in the first place.
Old financial technology was useful at the time, but maybe it is time for me to move on.
Is this a good thing is the question to be answered, but later on in this I will discuss that. I have written about Apple Pay and Near Field Communication (NFC) before, but now it seems to be really will be usable in Canada, with Interac announcing an agreement with Apple pay on using this technology.
NFC an interesting idea?
Before you leave this page to go set this up remember there are a few limiting factors here:
- You need an iPhone 6 series (or above) or a later iPad series (although who would wander around with an iPad to buy things). The Apple Watch has Apple pay also, but it ends up being “attached” to an iPhone as well.
- You need a bank account that you can access via Interac (figured I’d point that one out, just in case you were not sure).
- For the Interac part of Apple pay, you need to have an account with RBC or CIBC. CLANG!!! I knew there was going to be a catch.
- Apple Pay also works with Amex cards, ATB Mastercards and Canadian Tire Mastercards
OK, so the title is a little bit misleading, as only a few banks are covered here.
The real question, is NFC (Near Field Communication) a good thing? Depends on who you ask. If you read the link I supplied you will know:
NFC is a set of short-range wireless technologies, typically requiring a separation of 10 cm or less
Sounds perfectly safe, doesn’t it? PC World has a very good article about a few steps to take if you are going to use this technology (the reading the fine print and your agreement on use of the technology). The other thing to remember is if you are going to use this technology, your phone had better be secured (i.e. password locked, at least).
It will be interesting to see how well this whole thing works, now that it is more in general usage (in Canada).