For most people, myself included, both money and technology sit in the mental category of ‘functional magic’.
The details of how these things work are a little hazy although we’re damn glad they do, despite the inkling that they’ve snared us, ignorant and insatiate, in some nefarious spell. We’re vociferous about their failings, but we hesitate to dabble in the dark arts ourselves. We might have to sell our soul to the devil. We might have to do maths.
So I was relieved when yesterday’s Activate London summit from the Guardian – which, being focused on the predatory-sounding world of #fintech, promised to serve up a double shot of jargon and hype – proved to be both accessible and relevant. Beneath the “inspiring case studies” (read: pitches) and the failed attempts to explain what in Jobs’s good earth is Bitcoin, the speakers slowly gravitated towards three elemental questions.
What is money? What is the problem with money? And what do we need to do to make it better?
Billy Alvarado, the founder of the hugely successful cross-platform payment system Stripe, got to the heart of the issue when he reminded us that that money is not a single blunt instrument but a keen multi-function tool: a token of barter; a storage unit; a facilitator of personal ambition; a means to understand your own worth within your society; a method for comparing the value of countries across the world.
One of the problems with Bitcoin, he suggested, is that we expect its genuinely innovative but still very raw protocol to serve purposes – such as offering a stable method for mainstream consumer exchange – that it simply isn’t well-designed for.
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The result is a proliferation of platforms, apps and systems which must define as well as answer the problem they perceive to be limiting our economic ecosystem the most.
A way of keeping score
One camp of innovators considers that money should be an enabler of collaboration. Their scripture declares that our drive to ownership will make us extinct, but that the technology of a sharing economy will save our souls.
“Money is not a thing,” declared Jem Bendell, Director of the Institute for Leadership and Sustainability, part of University of Cumbria Business School. “It’s a way of keeping score between people doing useful things for each other.”
Benita Matofska of Compare and Share, a centralised marketplace for peer-to-peer accommodation and travel, and Aurore Hochard of Taskhub, a platform which connects people to the indie businesses and service providers in their area, sang along.
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For others the ownership economy is still the main game, but dogged by clunky tech and cross-border friction; hence startups such as Mobino, OpenMarket, GoCardless and TransferWise, which aim to make the mobile payment experience as easy and global as possible.
Yet others focus on money as a wealth generation tool. Many believe that the barrier to sustainable growth is an opaque and unethical banking system. Positive Money’s Ben Dyson explained how his team are attempting to wrest control from high street banks, creating debt-free new money that can be channelled into the real economy rather than property bubbles.
The CEO of Nutmeg, Nick Hungerford, described how his company’s emphasis on liquidity, transparency around performance and clear communication aims to game-change a sector built on the principle that “we take something really simple, make it complicated, and charge you to translate it back again.”
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Then there are the innovators who believe that money should benefit the individual and their society at the same time.
Fundrise, a startup that allows people to invest in local real estate projects for as little as $200, is already making waves in the States. Toby Eccles of Social Finance wowed the audience with his Social Impact Bonds, outcomes-based contracts in which public sector commissioners commit to pay for social outcomes (such as a reduction in offending rates) – effectively allowing people grow their personal pot and fund real change simultaneously.
Beating the establishment
But the single theme that united all these disparate tech visions was the importance of trust and the power of branding. For all their disruptive potential, alternative financial models will only convert the mainstream when they offer the consumer a sense of equal, or greater, security than state-endorsed systems and currencies – at least, in the west.
As Index Ventures’ Ophelia Brown pointed out, emerging markets with mistrusted and domineering governments will remain at the forefront of financial innovation, because they have much less to lose – it is unsurprising that China has seen more Bitcoin downloads than any other country in the past year, around 20 percent.
The winners in the fintech race won’t just be the ones with the best solutions but with the strongest and most authoritative brands, and when Jean-François Groff of Mobino suggested the Bank of Coca-Cola as a decent candidate, he sounded like he was only half joking.
Learning some spells
Overall, Activate was a little heavy on the PR (the ‘fireside chats’ with founders were bland at best, sycophantic at worst) and a little light on challenging insight.
The most obvious and pressing problem in finance – endemic inequality – was the one that was least well explored, and the best question of the day – which saw Big Invest’s Nigel Kershaw challenge the collaborative consumption panel to name technologies focused on shifting large-scale poverty rather than generating bigger margins – emerged three minutes before the bell and got swallowed by the rush to the wine.
But the event did convey a distinct sense that we devolve responsibility for understanding and experimenting with these models, however flawed and nascent they may be, at our peril.
Crowdtilt cofounder James Beshara’s parallel between today’s crowdfunding platforms and the early noughties’ WordPress sites felt particularly apposite. If a web log can evolve from midwestern cat ladies to CNN.com in a decade, where might fintech be in 2024?
Certainly, it’s time for more of us to get out our wands.