Dev.SN

Technology to End Banking

posted by Dopefish on Monday February 24 2014, @11:00AM   
from the money-in-the-mattress dept.

mrbluze writes:

"An interesting blog post by Charles Hugh Smith on Why Banks Are Doomed: Technology and Risk.:

The funny thing about technology is that those threatened by fundamental improvements in technology attempt to harness it to save their industry from extinction. For example, overpriced colleges now charge thousands of dollars for nearly costless massively open online courses (MOOCs) because they retain a monopoly on accreditation (diplomas). Once students are accredited directly--an advancement enabled by technology--colleges' monopoly disappears and so does their raison d'etre.

The same is true of banks. Now that accounting and risk assessment are automated, and borrowers and owners of capital can exchange funds in transparent digital marketplaces, there is no need for banks. But according to banks, only they have the expertise to create riskless debt.

...

One last happy thought: technology cannot be put back in the bottle. The financial/banking sector wants to use technology to increase its middleman skim, but the technology that is already out of the bottle will dismantle the sector as a function of what technology enables: faster, better, cheaper, with greater transparency, fairness and the proper distribution of risk.

There may well be a place for credit unions and community banks in the spectrum of exchanges, but these localized, decentralized enterprises would be unable to amass dangerous concentrations of risk and political influence in a truly transparent and decentralized system of exchanges.

It's still early days, but can new electronic currencies such as Bitcoin become mainstream without the assent of governments?"

• Re:Financial equivalent to technobabble? Re:Financial equivalent to technobabble? (Score: 2, Insightful) by DeathMonkey on Monday February 24 2014, @02:53PM

  by DeathMonkey (1380) on Monday February 24 2014, @02:53PM (#6054)

  This massively understates what it is that banks do (and what the core useful part of their business is). It is not simply the extension of credit (after all, the bond market has done this as well for a very long time and banks still exist), but also the fact that they are engaging in maturity transformation - so that depositors have access to their money on demand whereas borrowers get to pay their mortgage back over e.g. 30 years.
  
   
  Agreed 100%. In addition to that, banks can simply adopt these exact same technologies. Not to avoid withering and dying but just to improve the bottom line. Then people have the choice of doing their banknig with an FDIC insured entity with a name they recognize vs. some guys on the internet. Guess who most sane people are going to keep their money with...

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• Re:Financial equivalent to technobabble? Re:Financial equivalent to technobabble? (Score: 1) by Blackmoore on Monday February 24 2014, @05:34PM

  by Blackmoore (57) on Monday February 24 2014, @05:34PM (#6203) Journal

  Well; no. the banks CAN'T adopt crowdsourcing technologies. Conservative as they are - that would not be something you will ever see.

  You MIGHT see a federal Credit union adopt this. And they would work it until the next recession and lose on the deal.

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  • Re:Financial equivalent to technobabble? (Score: 1) by WillR on Monday February 24 2014, @06:04PM

    by WillR (2012) on Monday February 24 2014, @06:04PM (#6234)

    You're part right, we won't see it. If it works they will use it, though. The crowd-sourced data will just be another input into some black box algorithm like FICO.

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