In 1994, Bill Gates famously said “Banking is necessary, banks are not”. And in 2017, I made a video which I introduced with this note: “In this videocast, I discuss the need to build a truly pan-African digital remittance/transfer banking product which is agnostic of location or currency in Africa. None of the products we have today meets that standard. Largely, I envisage a situation where all you need to buy and sell across Africa is one bank account in just one African Union country.
“With that, you do not have to even think about the specific currency of that account as technology will seamlessly make it possible to access other African markets for payments, transfer, etc. The banks or fintech companies must still comply with all regulations related to international transfers, forex, etc. The only difference is that customers will not see them as they will be hidden with technology.”
At 7pm WAT, at Tekedia Mini-MBA, we will discuss “API Neobanking and Location-Agnostic SME Banking” when the team from KlaDot, a US-based neobank, comes to explain its mission to bring that future to us.
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Comment 1: I regret to disagree with Bill. Banks might not have helped him a great deal, maybe, because of his situation. But they are helping many individuals and businesses across domains.
Without banks, many businesses would not scale up… In fact, economic growth and sustainability will be uncertain as banks fund private investments through loans; hence, shifting Aggregate Demand(s) outward to closing in on Potential GDP.
The institutions (whether physical buildings with people or online facilities) are highly necessary for any economy to flourish.
In modern economies, for banking to take place, there must be deposits; and for those deposits to be maintained, there must be banks. And for banks to make profits, they must buy assets off the deposit liabilities, leading optimal assets – liabilities time mismatch management.
My opinion :)
My Response: You are reading that quote literally. Bill is not saying you do not need Banking. He is saying you do not need banks to do that. In China, you can do all banking services on WeChat which does not have a banking license. Bill was saying, those things can happen, but they must not be done by banks.
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