For decades, discussions of the future of banking and finance have centered on money — how it may be digitized, dematerialized and disrupted. But money itself is now being unbundled from its traditional forms, prompting a more profound shift in perspective. As banking becomes embedded into broader non-financial ecosystems, the relevant lens is no longer just about money, but the exchange of value.
This was reflected in a panel discussion at this year’s Sibos in Toronto, where I was part of a panel that discussed this massive transformation and the impact on the entire banking and commerce ecosystems. I was joined by Leda Glyptis, Ghela Boskovich, and Sergey Nazarov. They each provided unique perspectives on the future of value and on the massive change in perspective required within banking to embrace this transformation at speed and scale.
This evolution requires rethinking the actual exchange process and the role of financial institutions. In the future, banks and credit unions must evolve from being providers of traditional financial products to facilitators of value transfer. This transition requires rethinking exchange fundamentally. When exchange was equated with money, the focus was on payments. In a world beyond money, exchange is not just about payment but about enabling value creation on a personalized level.
“The infrastructure we build must move beyond handling only money to being able to handle concepts such as privacy, data, control and consent at speed and scale since there is a value in time and simplicity.”
— Ghela Boskovich, Financial Data and Technology Association
Future Components of Value
The nature of value is transforming in the digital era. Technologies are enabling new forms of value creation and exchange, while shifting social values demand more equitable and sustainable approaches. This prompts fundamental questions about how we conceive of, create and share value across interconnected systems.
The components of value in the future encompasses a broader spectrum beyond physical cash and coinage. It includes traditional currencies as well as digital currencies, cryptocurrencies, non-fungible tokens (NFTs), digital assets and data-driven valuations supported by blockchain infrastructures. The concept of value is becoming more fluid, decentralized and adaptable to the digital age. Patterns of exchange are being unbundled from traditional monetary forms.
Our expanding digital toolkit allows value to be defined, quantified, exchanged and experienced in unique ways. Some emerging dimensions of digital-era value include:
- Speed – Real-time accessibility
- Simplicity – Frictionless experiences
- Trust – Transparency of relational values
- Personalization – Contextual engagement potential
- Empathy – Focus on financial wellness
- Privacy and Security – Including embedded identity
- Social Relevance – Shared purpose and connectivity focused on sustainability
- Control – User empowerment
- Portability – Interoperability across contexts
As technology and marketplace norms evolve, additional dimensions of value will emerge. Value metrics and models will be hyper-personalized for each marketplace player and must expand beyond the transactional and quantitative. Capturing the richness of each value exchange in the digital age will present unequaled opportunities and challenges.
Supporting New Value Exchange Models
As the definition of value expands beyond traditional currencies, financial institutions must open up internally and externally by adopting platform thinking. This means creating and supporting new capabilities through application programming interfaces (APIs) and becoming facilitators in broader financial ecosystems.
For instance, BBVA transformed into an open API platform to enable new services via partners, while Dwolla built an API infrastructure to seamlessly move money between institutions. More recently, Cross River Bank and other organizations have developed banking-as-a-service (BaaS) platforms to power fintech innovators and allow for the support of new forms of value exchange.
Banks must also engineer the ability to support a seamless exchange of non-monetary forms of value, from data and trust to attention and identity. This requires web-scale platforms, crypto assets, tokenized incentives, embedded finance and other emerging models. Beyond decentralized finance and programmable money, banks and credit unions must increase investment in blockchain infrastructure to access crypto markets and support new forms of value creation at scale.
“Today, all different aspects of value are being tokenized and created into fractional shares that are a superior way to digitize value. There are unique properties that didn’t exist before, such as providing end-user direct control over pieces of value.”
— Sergey Nazarov, Co-founder of Chainlink Labs and SmartContract
Additional ways financial institutions must prepare for a future of value beyond money include:
- Embrace data as a strategic asset – Leverage data and insights to power value-added services.
- Focus on agility and open architecture – Transition from traditional channels to emerging platforms.
- Build partnerships – Forge collaborations with third-party solution providers and non-financial commerce platforms.
- Create new metrics of success – Move beyond traditional economic metrics to track value in terms of engagement, simplicity, trust and speed.
- Focus on sustainability – Build models to support social responsibility, sustainability, equity and empowerment.
- Re-imagine internal culture – Foster empathetic and innovation culture to better deploy new models of value exchange.
Realizing The Future of Value
The future of value is still being defined with the discussion just beginning. It will emerge from the desires of the marketplace and the collective actions we take today. Financial institutions have an obligation to listen to consumers, businesses and potential collaborators to determine how we create a platform for value exchange with wisdom, an openness to change and a commitment to embrace a broader marketplace.
This means embracing innovation, but also understanding that the definition of value will continue to evolve. Banks, credit unions and regulators must explore new models of exchange, but ground them in platforms that are secure.
“Organizations are trying to cope with a pace of change which is not just a technological challenge, but also intellectually and culturally a challenge using legacy infrastructures. But, status quo is not an option.”
— Leda Glyptis PhD
The path forward is not determining specific solutions, but creating the environment that is open. If financial institutions have the commitment to building an expanded marketplace for value exchange, there will be a future ecosystem that is more equitable, empowering and engaging.