A platform for innovation

The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth… or adventure his wealth in the natural resources and new enterprises of any quarter of the world that fancy or information might recommend’. This might sound like a comment about the modern wave of e-commerce, but was in fact a comment by John Maynard Keynes in 1920, talking about the early stages of globalisation. This quote was employed recently by Mark Carney in a speech setting the stage for the modern wave of technology-led change and, in particular, the impact it will have on the banking sector. He pointed to three specific focuses. Firstly, the decentralisation of banking, moving away from hub and spoke models, where the major banks dominate, to distributed finance models which are open to new players. Secondly the transition to a low carbon economy, which will require ‘enormous reallocation of capital and massive investments in infrastructure’ (estimated $100 trillion globally over the next 10 years). And thirdly, the rise of AI and big data, and how these can be deployed to decrease systemic risk and improve decision making (banking expenditure on AI is second only to retail at $10bn to 2020). The cumulative impact of these three trends is a big shake up of the banking sector, and significant investment in change. Carney cautions about the knock-on effects on society, noting, ‘When Keynes marvelled at new possibilities, a decade of wealth creation would follow, but its gains gave rise to imbalances in incomes and in trade’