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Bill Gates is wrong

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Many people delight in digging up a quote from Bill Gates in the 1990s, when he was talking about banks as dinosaurs and famously stated: “we need banking, but we don’t need banks anymore”. Yay! We can stuff the horrible big, bad banks and replace them with lovely tech.

Interestingly, twenty years after that famous statement was made, we’ve still got banks thriving and growing. Hmmm … did Bill Gates get something wrong? Actually, much as he’s far wealthier than me, yes, he got something wrong.

You see, what he probably meant is that we need to make payments, but we don’t need banks to make payments; or we need loans, but we don’t need banks to get loans; or we need to invest, but we don’t need banks to invest with. The list could go on, and such statements are correct because these are all transactional moments.

But for the core of banking, we do need banks, and that is where we want to have a trusted store of value. That is banking – a store of value that can be trusted – and only a bank can currently offer such a service. This is because only banks are licensed by governments to be trusted stores of value. You might cry but what about Trezor or other hardware wallets. Sure, those can store value, but the challenge is who trusts them and, being a physical hardware wallet, it can be lost easily.

A bank, as a regulated entity, provides a trusted store of value because, if that store of value is broken or breached, you have a guarantee of getting the value restored. This is a fundamental aspect of banking and why they are so heavily regulated, because they have to be trusted to store value.

This also goes to the heart of the libertarian idea of having money without government. You cannot have money without government as money only exists to enable governments to tax and monitor economic activity. A third of all money moving around the world is for tax purposes: corporation tax, income tax, sales tax and more are a primary motivator for why governments issue money. Without government, money becomes meaningless; and without a government licence, banking is meaningless. The licence to bank is why we need banks to do banking, and the idea of doing banking without banks is in the same camp as the idea of having money without government.

Just being pithy …

Chris Skinner Author Avatar

Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog,, 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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