Our Finternet Future: "Everything Everywhere All at Once"
"Large swathes of our financial system are stuck in the past."
The BIS delivers a POWERFUL READ that gives us a taste of the future of our financial system and calls it the “Finternet.” I call it Finance that is “Everything, Everywhere, All at Once”
This paper is not academic. Read it because it gives all of us in fintech a goal or objective to strive for or mountain to climb. Whether you like the term Finternet or not is up to you!
The Finternet concept is refreshing as the BIS brutally admits that our current financial system is outdated and has problems with speed, cost, and access.
Your Finternet future will be achieved through unified ledgers with tokenization, programmability, smart contracts, accounts, and immutable ledgers. Note that blockchain is not specifically referenced.
This is not a single master system that controls all of our lives, as many who loathe the BIS hypothesize; instead, think of multiple interoperable systems.
The BIS’s vision of a network of interoperable financial ecosystems, with individuals and businesses positioned at the center of their financial interactions, is a good one and worthy of striving for.
Finternet’s three foundational pillars:
(i) an economically sound architecture;
(ii) the integration of advanced technologies; and
(iii) a robust regulatory and governance structure.
👉TAKEAWAYS: Finternet Principles
Principle #1: Users at the centre
The key rationale for developing the Finternet is to offer individuals and businesses access to the greatest possible range of financial services, in the most flexible way and at the lowest possible cost.
Principle #2: Interoperability
It is neither feasible nor desirable to build a single unified ledger to encompass all financial assets and transactions. Accordingly, unified ledgers will need to be interoperable with other parts of the financial system.
Principle #3: Evolvability
The technological advances of unified ledgers will eventually be superseded. Accordingly, the Finternet should be able to evolve to accommodate future technological advances,
Principle #4: Modularity
The architecture must be endowed with the capacity to evolve through discrete, independently modifiable layers, minimising disruption across the ecosystem
Principle #5: Scalability
Unified ledgers need to be able to accommodate growth without compromising security and functionality.
Principle #6: Division of labour and competition
Public and private sector institutions both have roles to play in developing the Finternet. For the public sector, a key objective is to provide the “rails”, which could include the core infrastructure, rules and regulations on which private financial institutions can operate.
A level playing field can support innovation and lower costs for end users by reducing rents. In this regard, policymakers should bear in mind that in today’s system, inefficiencies are often someone’s profit; accordingly, some resistance is to be expected and will require careful compromises
Principle #7: Inclusiveness and accessibility
The ultimate goal is to make financial activities universally accessible, affordable, and inclusive, ensuring no one is left behind
Principle #8: Security and privacy
The security of the infrastructure is a fundamental design principle. This pertains to security both vis-à-vis users and of the infrastructure at large.
👊STRAIGHT TALK👊
The BIS is a consummate insider in the financial world and has become the high priest for modernization of the financial system.
That they have so forcefully acknowledged the limitations of our current finances as “stuck in the past” is significant and should put bankers on notice.
The next time you hear a banker say, “Our current systems are just fine,” understand that they are headed for extinction because they don’t grasp the scale of change.
In the end, while I’m not much of a fan of the name “Finternet,” I think “Finnoverse” would have been a better choice, I love what it represents because it will make our financial world cheaper, more inclusive, and more expansive.
Now please take note of Principle 6. When the BIS talks about “rents” and “some resistance is to be expected,” understand that they are talking about banks! The BIS is proposing “Digital Public Infrastructure” and banks won’t be happy about this!
If this is what the “Finternet” is I want it yesterday and can deal with the name:
“According to our vision, individuals and businesses would be able to transfer any financial asset they like, in any amount, at any time, using any device, to anyone else, anywhere in the world.”
Now that’s the future I want!
Thoughts?
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