The following is a statement of the broadest vision of how the world’s financial systems might change to solve some of the most intractable problems there are.
To bring 1 billion people into the digital economy, not just through transaction payments and receipts, but also with financial management capabilities that allow them to measure what they do well, what they don’t do well, how to contribute to society better, and how to prepare for the future.
The types of tools by which this will be done are all effectively known today:
- Inexpensive cell phones which are the personal computers even for the world’s poorest
- Internet mobile technology services, similar to Facebook, Google, Twitter, and Amazon
- Mobile payment and receipt systems, like Venmo
- Ubiquitous financial tracking databases, like available with blockchain
The impediment to this capability today is the fragmented and proprietary nature today’s financial systems and data.
- Financial data is maintained in many places in propriety forms by various intermediaries who provide little help to individuals in financial management
- Management of financial data is tedious, low in automation, and requires specialized knowledge
- Categorization of financial data, which is key to understanding finances over time, is a clean-up activity, post authorization rather than captured at transaction time (i.e., payment or receipt)
- Reconciliation with counterparty ledgers (bank, vendors, customers) consumes large amounts of resources if even attempted.
Sharing financial data with authorized counter- and interested parties has the greatest potential to overcome these impediments. Sharing financial data:
- Potentially significantly reduces costs to each party because actions taken by one are shared by the other
- Increases accuracy of the resulting ledgers because of the natural check a counterparty brings to the data
- Demands that financial data be moved from propriety locations and increases ownership by primary partners
- Eliminates the need for reconciliation and other wasted processes, and increases expertise in financial management by leveraging knowledge of others in it.
Cost is critical to such a system, particularly for widespread use by those most in need of the system.
- Financial data is most effective when it is very accurate over long periods, a very demanding data standard
- Reductions in computing costs must not be wasted on inefficient, sloppy code but rather increase accessibility to new customers
- System efficiencies cannot be added later; performance at scale must be embedded from the start
- To reach a billion people requires reductions in costs from todays system by hundreds or thousands of times.
Computer processes have increased efficiencies when they have increased consistencies and identifying fundamental data organizations is key to those. Recently developed ubiquitous internet technologies demonstrate the power of such a concept.
- Search engines are fundamentally organized around URLs
- Social media are organized around posts
- On-line retailers are organized around products or SKUs
- The fundamental data organization for any financial system is composed of a set of balances, which reflect positions as of a point in time, and the full set of transactions which gave rise to those balances.
With a system organized around such data, users will be able to:
- Swipe right or left to scroll through a set of balances over time
- See transactions which changed balances in those periods
- Initiate new transactions based upon those balances
- Aggregate balances to create higher level understandings over time or other attributes, to understand their financial world enabled because of the consistency of the balances and transactions.
Because financial processes are so costly, they were perhaps the first major system automated with the advent of computers. This infrastructure is now an impediment to the next generation of systems. The new system and its processes:
- Will differ from search engines, social media, and on-line retailers built in green fields in a sense
- Supporting individual’s needs will also support an organization’s needs if scale is built into the system
- Will likely develop first for business and then be simplified for mass use
- Are unlikely to come from existing technology vendors or industries like financial services, just like airlines were not invented by the railroads, nor on-line retailers by brick and mortar stores.
As Tony Venezia, a very seasoned financial system expert one time said after considering the above, “There is no other possible course.” The type of system described here will ultimately be made. When is the question. Collaboration to overcome the current system impediments will hasten that time, to the benefit of billions of people.
We encourage you to join us at Sharealedger.org in achieving these goals.