The Future: Competition from the Technology Arena

This chapter will explore the practicalities of developing serious competition to the financial and banking sector. As covered in previous chapters, the theoretical arguments point to systemic weaknesses within a mono-financial system. Earlier chapters also show the growing importance of non-banks within the traditional banking activity: a) non-banks have developed key capabilities to provide services covering the movement and exchange of money — helped considerably by banks outsourcing much of the development work (to non-banks), b) banks do not have all the technological capability to develop low transaction cost-based systems that is called for in the information age, c) banks’ business models are not based on low or micro transactions and, d) innovations within the electronic world are mostly coming from the non-banks. The preceding earlier chapters also give further possible examples of competing and complementary systems. However, the examples are mostly theoretical or relatively small scale. The big question that emerges as we come to the concluding chapters of the book is: can monetary and financial competition emerge to a scale significant enough to provide a stabilizing effect on the economy?