Modern banking traces its root to the Italian Renaissance in the 14th Century. The famous Italian banking family, the Medici, established banking operations around 1400, and the Monte dei Paschi di Siena Bank opened in 1472.
Banking systems unleashed the Renaissance, the Industrial Revolution and the modern age of technology. As the world’s financial intermediaries, banks became powerful — perhaps too powerful — repositories of information and influence. Europe strengthened its role as a global banking center until the mid-20th century, when technological developments in telecommunications and computers shifted the power base to the United States and Asia.
That technology-driven power base has been disrupted by today’s banking model, where transactions move in nanoseconds around the globe via borderless, worldwide operations. The Internet of Things connects us to innate, transmission capable objects. The connection is mostly silent — except for an occasional beep or whir. That changes with Woolet, a wallet containing a small beacon (powered by low-power, low-cost transmitters) that ties it to your mobile phone. When your wallet is lost or stolen, your phone buzzes — as does the Woolet. I learned about the Woolet from its crowdfunding campaign on Kickstarter.
Crowdfunding is a practice of project based philanthropy, a concept that has been around for much longer than people think. The concept was used in the late 1800s when funding to complete the Statue of Liberty ran out; a populist campaign was launched and over $100,000 was raised — at an average of less than $1 per donor — to complete Lady Liberty. Today’s practice of crowdfunding typically occurs via the Internet and has a financial impact in the billions of dollars annually, with no end in sight to crowd funding’s reach and impact.
Technology continues to evolve, and today, we use smartphones to pay for things. We communicate via screens, not people.
Like any emerging technology, Bitcoin is a work in progress. Long associated with the nefarious dealings of drug dealers, terrorists, and money launderers, Bitcoin is borderline illegal and a public relations nightmare. Yet, from a technology standpoint, Bitcoin has many admirable qualities: its groundbreaking software is open source and copyright free, making it accessible to anyone who wants to examine it, copy it, improve it and/or create applications for it. Chris Dixon, partner at the venture capital firm Andreessen Horowitz said, “Probably 10,000 of the best developers in the world are working on Bitcoin.” Technology continues to evolve, and today, we use smartphones to pay for things. We communicate with each other via screens, not people. Many experts predict the Internet of Things will allow us to remain continuously and more deeply online. These types of advances bring us closer to experiencing Ray Kurzweil’s technological singularity, a point in time (Kurzweil predicts 2045) where progress is so rapid it outpaces humans’ ability to comprehend it.
Main Street was long the target of Wall Street, which now sits in the cross hairs of Silicon Valley’s opportunistic sights. Technology companies like Lending Club, Prosper Marketplace, and Funding Circle facilitate lending transactions and broker credit using a model called “peer-to-peer lending.” Apple Pay and Android Pay are mobile payment services that digitize payments and reduce — or eliminate — the need to pay with cash.
Little or no innovation from traditional student loan providers resulted in the birth of entrepreneurial ventures like SoFi, Earnest and CommonBond. Digital natives — millennials — hold the largest amount of student debt in the country’s history, yet financial institutions have not responded with the types of products and services that satiate a generation with life (and financial) goals that are vastly different from those of their parents.
Baby boomers, however, are not dismissed when it comes to innovative financial products and services. Given the enormous wealth controlled by boomers, financial planning and wealth management areas are ripe for innovation. W.J. Rossi, a partner at Gainesville-based Koss Olinger, shared his expertise with financial planning and the growing complexity that results as individuals become wealthier. His firm uses software that aggregates clients’ financial holdings.
“Instead of having assets split in many places — making it difficult to see the big picture — one can now see an aggregated total,” he said. “Previously, it was common for someone to focus their attention on their largest assets or largest accounts while paying little attention to the smaller or smallest ones. Now, everything gets your full attention.”
Disruptions continue apace in financial markets as technology innovations reshape experiences involving payments, investing, borrowing and saving. Technology’s empowering ways have emboldened consumers by increasing choices, strengthening their wallets and injecting transparency into the global financial system. These disruptions resulted because innovators encroached on the financial sectors’ sacred high-margin products with limited competition in order to produce a “democratization” effect that continues to ripple through the sector today and into the foreseeable future.
David Whitney serves as the assistant director in the University of Florida’s College of Engineering Innovation Institute. Whitney previously served as the entrepreneur in residence in the University’s College of Engineering and continues to teach a course, Engineering Innovation, to both undergraduate and graduate students in the college. Engineering Innovation features the Spotlight on Innovation series, which Whitney created; Spotlight brings the real-world stories and experiences of innovators and entrepreneurs into the classroom for insightful conversations. In addition to his roles at UF, Whitney is the founding managing director of Energent Ventures, a Gainesville-based investor in innovation-driven companies.