Banking is Necessary Banks are Not.

This is a quote attributed to Bill Gates, I like it. 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 bank’s strong point (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. Programmers were paid ludicrous sums of money to make the following changes 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 risk averse.
• 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 led 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.

Is the future so Bright?

We need banking services, but, unfortunately, the way the banks implement them, leaves a great deal to be desired. The banking business will see many changes over the next few years. However, not quite as many as many financial pundits think.