Banking Reimagined

For the most part, banking has not changed the way it works in nearly 50 years.  Since the advent of computerized banking in 1970’s, things have largely remained static, with a bunch of accounts sitting on a database, with balances checked and balanced every day.

It’s telling that we can send an email to the other side of the world in less than a second but the same digital information when handled by banks can take up to four days.  Apparently, the banks’ computer systems knock off at 6pm on a Friday afternoon and the batch jobs can’t run again till the Monday. A computer system that only works five days a week. Need I say more. 

When you zoom out like this and put things into perspective, it’s comical.  We’ve watched video shops disappear with Netflix, taxis get destroyed by Uber, Myer gets destroyed by Amazon and yet somehow the banks are surprised that someone is trying to challenge them in the world of IT.

Many Australians couldn’t tell you who the company Block is.  It’s not a sexy nor well known and there is no real reason to know about them.  And yet, next month they take over a brand known by 73 percent of Australians, AfterPay, the Australian business that revolutionized that old thing that has been used to pay for many a Christmas present, Lay By.  Some six million Australians use AfterPay and would more than likely have their mobile app on their phone. 

The new big boss of this all, Square’s Jack Dorsey, has seemingly come to the logical conclusion that he can use Bitcoin as an open-source bit of software to act as his core banking system.  Why is this?  It’s because users all have a unique account that’s storing bitcoin that is worth something.  People can also use crypto to store values of USD and EUR through stable coins. They all sit in a wallet sitting on phones just like a mobile banking app.  To take this a step further, they could add another layer of software to the store accounts of people you pay money to, to help manage and schedule transactions just like a bank.  Think of it as credit card that you can use at Coles to buy your weekly groceries.  We all know that Australian retail giants like Coles and Kmart all use AfterPay. So now Block, that little-known business, has a way to talk to them about this other payment system they are looking to launch built around Bitcoin.

It seems logical that, if the infrastructure is in place, big retailers could set up a payment system that could go straight from customers’ bitcoin wallets, with Block helping them build a payments system.

In a different scenario, let’s go back to those retailers. Next time you buy coffee look at the register they are likely using.  Many small businesses use Square’s terminals (a division of Block), which capture the business transactions, monitor stock levels for their store and help them complete their BAS statement.  It’s a computer with a nice screen, so what’s realistically stopping them from putting a bit of employee information in there and say running their payroll?  Better yet, if their staff have Afterpay on their phone, let’s upgrade the app to CashApp and process their pay in there for free?  We have suddenly built a financial ecosystem that has completely cut out the need for banks.  If you don’t have a mortgage, you don’t need to talk to them anymore.  Next month when Block completes its acquisition, Australian banks will need to understand that the Rubicon just got crossed.

Changing and moving as quickly as a company like Block will be extremely difficult for the banks to do.  Their thinking on how they can facilitate those ways of doing things needs to move by a quantum level.  Monday to Friday trading will no longer be enough, as Bitcoin trades 24/7 and 365 days per year.  It never stops!  Jack Dorsey and his army of developers at Block just knocked on Bitcoin’s door and offered their services to truly change the world of banking as we know it.

To me, Bitcoin, with its massive adoption gains, is a very low-risk investment.  The use case I have just described and the constant new ways people are finding a use case, is compelling.  If a company like Block can then bring a layer of software through CashApp and Square to help give a better level of banking than we have today, with little to no fees, surely that’s a good thing. It’s effectively a way for us to all use bitcoin in an easy way.

This year will be the start of the banking revolution and Australia is at its center due to the broad consumer and retail channels that Block just purchased via AfterPay. Best of all we all stand to benefit from banking 24/7 and 365 days of the year.