Maurice Cleaves, CEO of Payments UK, opens its Changing Payments Landscape report noting that the smartphone and its interaction with the internet has led to change unforeseeable as little as 10 years ago.
Over four decades, the financial world grasped the potential of the relational database and then the internet. Now corporates and individuals often communicate with their banks almost exclusively through internet portals and smartphone apps.
Cash can be obtained at ATMs that are as likely to be found in your local supermarkets as at bank branches. We are anyway shifting to non-cash solutions, such as a swiped debit card. Now distributed databases (blockchain) loom as the next great efficiency step forward for financial services, government, corporates and individuals.
The real world is also changing.
Population is rising with pressure on resources. China is investing in African agriculture and transport infrastructure as no colonial master ever did. Energy supply has become more complex as oil and gas become harder to extract. LPG cargoes are bid for as they travel the world. The UK now relies on pipes from Norway for gas the Norwegians do not require because they have hydro-electricity. Continental Europe relies on gas pipelines that start in Russia.
The science world wants to rename our time the Anthropocene Era, with a suggested start date of the first atomic bomb, to recognise the irreversible change humans have made. I propose to add to that the more local human subset of the Age of Entitlement: society born into the post-World War II network of treaties and Western economy welfare states; where the G20 dictates financial regulation; and material goods flow unceasingly to those who can pay.
What spooked the G20 members in the aftermath of the 2008 global financial crisis was that their economies appeared to nearly collapse because we no longer trusted banks to hold our cash, and because our currencies are ‘fiat’ in nature: they exist because as societies we say that they do, and not because they comprise lumps of precious metal for which value is universally recognised.
In 2007, Lord Cameron of Dillington echoed the 1906 statement of Alfred Henry Lewis that civilisation is only “nine meals away from anarchy”
We have yet to panic to the stage where we no longer value the currency, although some have started to become choosier about the currency held.
As corporate treasurers, who daily manage the shrinking credit creation of banks, and the increasing burden of reporting, it is easy to lose focus on the core driver of the G20’s increase in regulation, which is to try and avoid another run on their domestic banks. In such a scenario, the resultant civic unrest is the point at which one stops worrying about orderly financial markets and gets out on the street to start hunting food.
In 2007, Lord Cameron of Dillington echoed the 1906 statement of Alfred Henry Lewis that civilisation is only “nine meals away from anarchy”. But in a modern world just in time food supply chains are reliant on efficient financial infrastructure.
Financial services and financial markets are only a subset of modern society, and they rely on infrastructure, which requires reliable energy supplies, which also enables production of the biochemicals we use to produce and then transport food. All these things that we believe we are entitled to are interdependent.
The thought I will leave with you is that failure to decide between nuclear, fracking and mining for energy, between housing estates and national parks or agriculture, is the point at which we start to consider our entitlement to turn on the light switch, hop into our chosen form of transport, tap into an endless source of food at the supermarket, and log on to the internet for pleasure and commerce.
The failure to match financial regulation to the financial enablement of other parts of the same society puts that sense of entitlement at risk. Hoping that the world of fintech will alleviate the capital constraints of post-2008 regulation may be akin to oil-free Germany and Japan pushing electricity and its by-product, hydrogen for transport, while shutting down their nuclear energy plants.
Stephen Baseby is former ACT associate policy and technical director @BasebyStephen
This article was taken from the April 2017 issue of The Treasurer magazine. For more great insights, log in to view the full issue or sign up for eAffiliate membership