A decade of progress in finance is only the beginning
Ever since coming to the UK, first time in 1998 as a student, there has always been a need to exchange currencies and send money across borders. Back then, my mom would have to convert Greek Drachma1 and wire them to a UK bank account as British Sterling. In the nineties, making a bank transfer from one country to another, in a different currency was an opaque process, associated with high costs with very little transparency on the fees and how it all worked. The cost was tens of pounds (thousands of drachmas) and it would take days for the transfer to complete. Banks were pretty much responsible and in control of currency exchanges and money transfers in a market with a dominant position.
As late as 2010, about 10 years later and the introduction of the Euro in Greece, Sterling in the UK, transferring money to a Greek Euro bank account would still cost tends of pounds and take days to complete. The only difference is that going to a branch wasn’t required anymore. You could setup, make and monitor the progress of a transfer all with the power of the internet, using mobile or web banking. Roughly, you would come to expect the following in terms of the time taken and associated cost:
- £XX (tens) of pounds in fees from a UK bank to “convert and make” a transfer
- €X of euros in fees from a Greek bank account to “accept” the transfer
- X days for the transfer to complete and the money to become “available” in your account
Say, to send £1000, you would have to pay £30 to a UK bank, €5 to a Greek bank and wait 3 business days for the money to become available. It was widely accepted and understood that a transfer on a Friday evening, could mean your money was outside of your control and unavailable until Tuesday.
Over the last 10 years there’s been many changes in banking that albeit slowly, have lead to a steady overhaul of the banking system over time. Changes to KYC2, the introduction of the E-Money Directive3, SEPA4, the Cross-border Payments Regulation and the migration to IBAN for bank accounts to name a few.
In my opinion, these changes in the regulatory framework is what eventually forced banks and new participants in the market to innovate using technology.
To the point where, today, I can send £1000 from a UK bank account with a total cost of £4.49 and have the money available within seconds to my Greek account, even on a Sunday. I believe this is only the beginning of the banking transformation and one factor that can play a role and have a knock-on effect on how we think of money/currency, what is the role of a bank account, where/how we get paid/credit, how a tax residency is defined.
As someone in tech and with some experience working in fintech5, I find this prospect more exciting and the environment ripe for the next innovation in banking/finance. Keep in mind that technology followed regulation reform that paved the way; not the other way around.