What is the future of banking?

Some people think that in the near future we will be holding our banks in our hands, because phone companies and telecommunications companies will become banks. The next generation’s banking services will use mobile payment systems, micropayments and offer mobile phone credit card transactions and loans. Every time a foreign worker sends money home, the bank charges a service fee. Think about the economic impact of remittances from foreign workers using SMS credit to avoid foreign exchange transaction costs.

Biometrics thumbprint technology will allow us to make large mobile phone payments. This will mean that commissions and interest charges on loans will go to the telecommunications companies. The huge amount of credit card company revenues made by charging interest may move to mobile phone transactions.

Many banks are being threatened by the ‘digital’ world. Consider how you can pay and access money at the supermarkets. Airlines, too, accept payment electronically and confirm ticket sales via an SMS message to your mobile phone.

Activity

You are on the School Newsletter Committee and think that the article on the following two pages is newsworthy. To help you understand the article, fill in the definitions of the words in the vocabulary box.

Write a 200-word summary of the article for your school newsletter and explain why you think this is a relevant idea for secondary students.

You will need to know the definitions for the following words:

Vocabulary biometrics –

radio waves – microprocessor – trading platform – transaction – incentives – foreboding –

seize –

remittance –

relative –

GDP –

trillion –

‘on the doorstep’ –

‘made in heaven’ –

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This is an article based on a speech by conference keynote speaker and futurist Dr Patrick Dixon, who is often described as Europe’s leading futurist. He is chairman of Global Change Ltd, a lecturer at business schools and author of 10 books including Futurewise: The Six Faces of Global Change. He advises Fortune 500 company boards on implications of a wide range of global trends. Search the Internet for videos of his presentations and other people’s speeches about mobile phones and banks.

Why Mobile Phone Companies will Become Banks

‘Every mobile phone company has the opportunity to become a big bank and every bank should be really worried about mobile phones’, says Dr Patrick Dixon.

Most credit cards now have chips inside them, called RFIDs – Radio Frequency Identification Devices. Dr Dixon calls these ‘grains of sand’, which are really computers with hardware, software, microprocessors and permanent memory. They can last 100 years in the environment.

They take radio waves from the environment in order to store data permanently within their operating systems. These chips are not only in credit cards, though, they are also in our mobile phones. In the future, what this means is that our credit cards will no longer be useful.

We will just throw them away!

Imagine the credit card companies making a deal with a telecommunications company, which manufactures or develops a new trading platform allowing for a new generation of phone. It could work like this:

You go into a shop, petrol station, restaurant or Inland Revenue to pay your taxes.

You press a button and ‘bloop’, an SMS pops up on your phone.

You place your thumb on the biometrics on the screen, so it knows who you are.

You press the pay button to pay and you can safely approve a HK$100,000 transaction or more.

The credit card company would no longer be lending the money to the client, instead it would be the telecommunications company lending the money and earning the interest on the transaction.

The amount of money to be made from these lending transactions is extraordinary.

Dr Dixon reports that in the UK about 1 trillion dollars of customer transactions will be made by 2010. This creates a customer credit card debt on these transactions that at a high interest rate could create a multi-billion dollar market.

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Project 2 – Banking – Task 7 Therefore, instead of selling mobile phones in the future, the telecommunications companies will be competing with each other to give them away! They will then be able to make money on your financial (banking) transactions – paying for purchases and paying bills, etc. They will be offering free phone and SMS service, because they’ll expect you to discard your credit cards and use your phone instead for making payments.

As the banks operate a huge credit card business, this idea is rather foreboding. This glimpse of the future represents the biggest shift in financial services imaginable, but it has already begun. Foreign workers are now able to send money to their families in their home countries by using their mobile phones. This is done by using two copies of the same SIM card. One is owned by the foreign worker and the other by the relative back home. For instance, the worker buys minutes on their phone and the relative spends them. These minutes are a new currency (money), which can be traded. It is an ideal money system, because there is no foreign exchange transaction, no banking losses and no taxes. The minutes can be spent on anything.

This is something which every bank should be scared about and every telecommunications company should be dreaming about. It’s the greatest possible shift in financial services that you can imagine and it is right on the doorstep now for the first company in the world that really seizes the opportunity. No one has really got hold of it yet. And it doesn’t stop there.

A significant amount of the income of some Indian communities is generated in places like Dubai. It’s the same in Mexico, from Miami. It’s called remittances and these remittances can be responsible for at least 4 – 5% of the GDP of many nations. It’s when the son earns in one country and is sending money back home. And the telecommunications companies have a fantastic opportunity here. Vodaphone is already doing it. You have two copies of the same SIM. You own one and your son owns one. Your son is in London and is sending money home.

All that happens is he’s buying minutes on his phone and you’re spending them. You can spend them to buy rice or you can spend them to buy a car. You can spend them on whatever you like. They are currency, they can be traded and, as mentioned previously, there is no foreign exchange transaction, no banking losses, no control and no taxes. It’s a money system made in heaven and it is happening already.

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task 8