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The end of a ‘bank account’ as the digital me takes over

I had a really interesting conversation with Chris Barker, Head of Digital and Engineering for Royal Bank of Scotland.  As usual, the conversation moved around data analytics, deep learning, artificial intelligence, building enterprise data systems, separating content from processing, re-platforming the back-end infrastructure and core systems and more.  I’ll write more about that stuff tomorrow, but the bit that intrigued me is when Chris said he can see the idea of a bank account disappearing.

Now this builds on an idea I’ve already blogged about – the digital identity on a shared ledger concept – but this went further, so here’s how and why ‘bank accounts’ are going to be unnecessary in the very near future.

In a physical world of money and travel, individuals needed very safe and secure places to store value, and trusted authorities to issue them identities.  This meant that Governments had to provide you with identifiers such as a passport and driving licence, and banks had to have those proofs of identity to open an account for you.  That account was guaranteed to be managed on your behalf as a safe and secure store of value.  You had other issued services, like health certificates and loyalty cards, because these proofs of access and identity and stores of value were all being managed through the physical exchange of value, goods and services.

Now we live in a world that is turning digital, and digital means democratisation and decentralisation.  We are putting power into the individual’s hands and so, rather than having multiple identifiers from a central authority who issues you with proofs of access, you now have your own digital bucket for which you can issue access to central authorities on an as-needed basis.  There are no multiple external and centralised stores of your proofs, just one decentralised store that you manage.

If that happens, the contention is that the idea of a bank account that is stored externally by an authority who can centralise and transact on your behalf becomes irrelevant.

Think about it: you have this deposit account system, for you to give your things of value to a trusted external third party who manages, stores and exchanges your value tokens on your behalf.  If we have moved to a federated, shared, open digital ledger, why do you need a trusted third party to look after your identifiers and proofs?  Why do you need a central authority to deal with your movement and needs?

These are fairly fundamental questions, and does lead to a conclusion that is quite uncomfortable and disturbing, for some, but exciting and a great opportunity for others.  The conclusion is this. 

Banks, as I have maintained for some time now, were built in the last century for the physical distribution of paper in a localised network based upon buildings and humans.  To manage that physical structure, our identities, proofs and store of value had to be validated by centralised authorities who are trusted to provide these identifiers, such as banks and governments.

But now, we live in a world where value and identity is being digitised to support the digital distribution of data through a globalised network focused upon software and servers.  To manage this digital structure, our identities, proofs and store of value has to be validated by the individual as a democratised, decentralised structure cannot operate if a centralised third party has to manage them. 

This will be the most significant change in the world of finance if true: the movement of identity to a federated, shared open ledger system (blockchain protocol if you prefer) where everyone can be trusted because the internet validates who owns what and can trade with whom.  As Bob Greifeld, CEO of NASDAQ said last week, this technology enables me to trust you without knowing you.  That can only happen if we own our digital selves and, in owning the digital me, I won’t need a bank account.


The first comment I received on this blog entry is that my owning the digital me sounds like "storing your pound notes under your own mattress".  Unfortunately this misses the point, as storing notes under the mattress is a physical metaphor.  In this digital me world, my money is just data and I can store it where it's most secure.  That probably is not in a bank account, but in a Trezon or Ledger wallet.  The key is to consider that you are now dealing with secure data stores, not potentially insecure bank accounts.

About Chris M Skinner

Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, the Finanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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  • Jon Vyse

    Hmmm. This sounds similar to storing your pound notes under your own mattress. You can do it if you want to….

  • Chris Skinner

    Storing notes under the mattress is a physical metaphor. In this digital me world, my money is just data and I can store it where it’s most secure. That probably is not a bank account, but in a Trezon or Ledger wallet. The key is to consider that you are now dealing with secure data stores, not potentially insecure bank accounts.

  • Other than interest (and that pretty non existent these days) deposit accounts are just containers. And for those of us who never carry a balance, so are credit/charge cards. The value banks add is accebility and utility. So this is an evolution of that and the “disruption” of new technology further extends that. This is a great article. Tokenization is another area that’s a part of it all too, I wish my Social Security number and drivers license and passport numbers were tokenized.

  • UmaSankar VN Kopalle

    Interesting. In that case what will happen to numerous services & products which we have from Banks & Financial services ? Would this lead towards some kind of Digital Barter system without the involvement of money as such ?

  • A lot of this makes me think of the Digital Asset Grid project a the time. My big lesson learned at the time was three-fold: 1) branding of the project is important, the “digital me” just won’t cut it 2) we must be able to articulate how this helps solving/connects with the actual business problems and challenges banks or other nodes in the grid have today, and 3) you must take the whole hierarchy/community on the journey about the evolution of the narrative and thinking in and about your project. I fully agree with your conclusion that we are moving from a secure money store to a secure data store. But to do what ? What NEW value propostions will this enable?

  • Did you mean a Trezor bitcoin wallet?

  • Chris Skinner

    Jim Charanis – thanks
    UmaSankar – pretty much
    Peter – the DAG was way ahead of its time. Great ideas from the innotribe days.
    Dharmesh – yes, as one example. Others are companies like Circle that provide a secure data store.

  • From a technology perspective I am sure we are moving toward the Digital Me. I am much less sure about where the liability model fits- Chris may tell me he is Chris because his identity is stored in a blockchain, and technologically that may be so. But what if for whatever reason it is not Chris or if Chris gains access to my digital bucket and empties it without my authorisation- who is liable/where does the buck stop ? What is the dispute resolution process? Identity takes us only so far, Trust is a necessary corollary ! Even the Passport carries an obligation/a liability on the part of the Issuer (as is written in elaborate language inside the front cover) hence we trust it to get us out of tight spot (eg a holiday resort in Egypt) JohnB

  • Everyone who transacts with money needs a Financial Address. Let us credit banks for giving us our primary Financial Address. It is true that we have multiple Financial Addresses now due the large number of channels, identifiers and platforms available. Example, My ICICI bank can give me one Financial Address, my PayPal account may give yet another Financial Address. Usually the first one is the one which undergoes the maximum KYC. There is a cost to such verification and one cannot ignore this aspect which is being diligently by the Financial Institutions such as Banks.

  • Chris, call me biased if you like, but your future self will still need digital cash that will need to have been created, distributed and be secure, otherwise we lose control the money supply. The solution will be pockets of value in the cloud based on Tibado IP. BTW folks, I’m biased because I am the CEO of Tibado!

  • Useful preface but ignores the profound lack of identity and transactions security in mobile devices and networks. Watch the Estonia eCitizen platform and the next generation hard coded mobile chipset for the EU standard for secure mobile transactions. This includes a secure segregated ARM CPU and memory for PSD2 Financial transactions and encryption processor.

  • Chris,
    Although I am a big fan of this idea, it still raises several issues :
    – distributed ledger implies having a processing power to run as part of the network… Does it mean that everyone should have a banking processor somewhere, perhaps in the cloud?
    – who will certify the digital identities and thus the on boarding of a new person in the distributed ledger?
    – how to control this new financial system without central bank?
    – and last but not least, it implies that banks will not offer anymore account management and thus won’t they be unbundled in the process?

  • peter L

    If you trust the internet or whatever the internet becomes, all you need is your physical person to perform any transaction. Forget the phone, or device. Record your fingerprints, retina scan, well if we are going that far DNA also, all at birth.
    If you do not, you cannot function in society. Of course governments have to step up and ensure that all people have access to this. Maybe re-record at periods when one of them might change (eye colour … babies eyes can change). Are there others that can be recorded? You always need one of the identifiers constant to change the other. As I write this I think DNA is the real answer. Think how if no one on earth can perform a transaction without being known to the system.
    Who owns the system? This concept goes far beyond Banks.
    Think if DNA, finger prints, retina scans, are available for all people (including those we are looking for … think ISIS), likely it would be easier to catch/find those that are acting against the morally acceptable. A little off topic maybe.
    A little like big brother. Scary, maybe! Safer, maybe!
    As always how is the data protected, and how to prevent compromise or unauthorized access. This all requires someone to develop a system to manage everything, ultimately coded software. Maybe the machines write it and maintain it for us! It may take a generation or 2 for this to become universally accepted/adopted.