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Peter Cochrane's Hard Drive 1996 Banking on IT Macro-economies based on micro-prices are becoming significant as more software and services are sold on CD or on-line. Classic books, reference works and interactive multimedia entertainment packages are available with over 25,000 CD titles now on sale for a few tens of pounds. The complete works of William Shakespeare cost only 5p on a CD along with 2000 other works. Many soft products can also be purchased on-line direct from manufactures world-wide. Even travel services, furniture, clothing, and food are available on-line. This is creating a future of micro-money and macro-economies. The new on-line companies will see some remarkable new phenomenon as people buy and discard products faster, markets become more fickle, and competition more transient. In this new world companies are likely to be created, come to dominate, and then die faster, as the economic cycle also speeds up. These new industries will require new forms of commerce - new ways to charge and pay - in a far faster world of much more for much less. Banks will have to become electronic databases with no human intervention as cheques and coinage are uneconomic for such small transactions. It is also clear that anyone with a PC and a modest programming capability could open their own bank. Car manufacturers and telephone operating companies have already moved into banking and financial services. Perhaps software suppliers will do the same and make enormous savings by becoming the distributor, wholesaler, retailer, and banker! One computer company recently put its sales and marketing catalogue on-line now deals with 1.7 million enquiries a week! All of this will erode the traditional banking sector and be compounded by a disappearing commodity - coinage. It seems remarkable that metallic and paper tokens (money) are still used in a world of information technology and electronics. Credit cards, electronic cash cards, the electronic purse are already in everyday use. In this information world no money is exchanged - databases are merely updated. There is no gold, or any need for it - it is a moribund concept! In a sense, geography is also dead and for the customer the choice will increasingly become stark. You can still travel into town, with all the inconvenience and time wasting it entails, and pay the additional overhead of a shop, wholesaler and distribution chain. Alternatively, you can go direct to manufacturer in the USA, make a purchase and have your software delivered on-line at a fraction of the price, by-passing VAT in 2 countries. At the same time the database of only two banks, customer and producer, change negligibly. No middle men, no non-value-add links in the chain. We can now see banking as just information transactions! In 20 years we may look back with wry humour at those who currently argue for regional currencies bearing the profile of the head of state. Such concepts are likely to have been assigned to museums as the obvious alternative, bits, take over. The world economy is being transformed by IT and by 2015 some coinage and paper money might remain, and perhaps even a few cheques, but I?d bank on IT! Peter Cochrane holds the Collier Chair for the Public Understanding of Science & Technology at the University of Bristol. His home page is: |
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