The vast dichotomy between the sophisticated and the obsolete: Op Ed
Whilst London leads the way in terms of financial technology, institutional trading and, well, sheer genius, the rest of the nation’s traditional financial sector serviced by the very same banks, is a wax candle by comparison.
Here in England, just three weeks have passed since the electorate made its case clear for Britain’s exit from the European Union and exactly as predicted by FinanceFeeds, the British economy is beginning to boom and entrepreneurism is once again a mainstay of British business.
London’s financial sector is going from strength to strength as the stock values of listed British firms on the prestigious FTSE100 venue are rising once again and the modernity that marks out Britain as a world-leading innovator in the technology that will power tomorrow’s institutional financial industry is flourishing right the way from the institutional giants of Canary Wharf, to the Millennials who inhabit the trendy former warehouses of Shoreditch that are busily transforming Bitcoin technology into automation software that is the subject of massive multi-billion pound venture capital investment from global financial institutions in order that the intrinsic Blockchain software can be used by large banks to automate much of their operations.
The Square Mile, a colloquial name for the City, is home to the most knowledgeable and experienced institutional electronic trading professionals in the world. A five minute conversation with any operations executive within any of London’s electronic trading firms is enough to be fully aware of their world-class caliber.
On this basis, London dominates. Its banking sector is plate glass, ultra-modern and handles 49% of all interbank Tier 1 FX order flow for the entire world. The world’s largest FX dealer, Citigroup, towers into the sky from Cabot Square, its trading desks responsible for 16.1% of all global FX market share, with top of the range execution systems which in turn provide feeds, along with the other London banks, to prime of prime brokerages which then provide via ever-evolving and often in house technology, aggregated liquidity feeds to the astute and urbane brokerages of the City.
What about the traditional banking business?
The retail, non-London centric, customer-facing mainstay of the exact same banks that handle, with great levels of sophistication and technological advancement, retail customers with ordinary products such as mortgages, current accounts and business banking facilities.
This is where the absolute dichotomy begins.
A dichotomy so vast and a gulf so wide, that even though these retail outlets are part of the same companies that we all hold in such high esteem, they are unrecognizable as part of a modern financial markets structure.
This week, I have made some inquiries into the methods of operation of retail banks here in England, the results being somewhat astonishing.
In modern banking in many nations, a simple task can be performed over the counter, within just a few minutes as long as the relevant customer documents are presented.
Not in England.
You want to open a business account with a major, multi-billion pound British bank? Be prepared to wait up to three weeks to make a physical appointment with a business manager.
Three weeks……. goodness me.
HSBC, a giant with electronic trading presence in London, Hong Kong and mainland China, has retail branches on every street in every town, the length and breadth of the land. I made research to see what is needed to open a simple business account, with no credit facilities. It is nigh on impossible.
Instead of being greeted with an experienced staff member who can explain how this very straight forward, everyday task can be carried out, I was confronted with “we don’t, we can’t, it isn’t” and many other negatives. The representative, who had very little knowledge of business banking, explained that any applicant needs to see a business manager, who only visits the branch once a week.
This pattern proliferates across many rival banks. Lloyds Bank and Barclays, both vast institutions, Barclays being the world’s 4th largest FX dealer with 8.45% of global FX market share, were equally negative and operated a similar manual system in which an actual account manager needs to visit in order to conduct an application, a process that could take several weeks.
This is not only completely outmoded practice, as many banks in many modern nations with developed financial markets and technology sectors will be able to conduct this simple procedure on the spot, with the client walking away with an account number and internet banking log in credentials, but it is also very expensive for both the customer and the bank itself.
Customers, especially those with businesses, have to spend almost a day going to an appointment, which could be several weeks after inception of their business, which is a day lost, and a day lost for a senior executive is expensive.
This is also expensive for banks. Banks do not make the majority of their profit from retail current and business accounts, however the practice of form-filling in branches with human resources, and having to make appointments for a business manager that travels between branches in a company car, whilst not seeing customers during the traveling period, is a massive cost, and is resource and time hungry.
The only bank during this research that had a fully modern system was Handelsbanken, and they are Swedish.
Handelsbank does not advertise for new business and works on referrals from existing customers to onboard new clients. It also does not occupy High Street locations, instead being on modern business parks and can deal with new inquiries via a dedicated account manager who already manages the account of the customer that made the referral, there and then with only a compliance procedure to overcome.
Automation exists in many banking practices in many nations, but not in Britain’s retail sector. The contrast is so great between the old-fashioned banks of the High Street and the plate glass institutions of Canary Wharf that even the regulatory authorities are antiquated. The Prudential Regulatory Authority (PRA) and the Bank of England are responsible for oversight of banking practices. An old-school, wood-paneled society indeed.
The FCA on the other hand, which looks after the oversight of non-bank and electronic trading entities is ultra modern and even has a FinTech development sector which provides a framework for developers to come up with the latest and greatest new FinTech in the world.
London’s Canary Wharf and Square Mile is a 2017 Christian Lebouton high heeled shoe, whereas the High Street branches of provincial England are pipe and slippers.
In a modern society such as Britain in which innovation and business ethic is at the very top of the agenda for its independent future, this must change, and automation is the only way forward.
The technology is there. The people are ready for it. The banks, upon whom the backbone of Britain – today the innovators and Millenial geniuses rather than the white van men of the 1980s – rely, are essential tools and essential services for ensuring that Britain succeeds as a nation that is ahead of the others in the region, however as long as this old fashioned, recalcitrant and clumsy legacy methodology blights the High Street whilst Canary Wharf and Silicon Roundabout shows the entire world the true face of British financial innovation, there will be an elephant in the 1890s Elizabethan drawing room, and a fly in the pre-industrial revolution pottery ointment.